Trump Promises Sub Two Dollar Gas
A popular promise to voters will ultimately leave them disappointed, and ultimately wondering why he can't deliver.
Regardless of anyone’s political leanings, I think most of us can agree that when it comes to politicians and their campaign promises one thing is clear, they are often hyperbolic fairytales designed to excite the base. One of the most shocking campaign promises I ever heard was “no more drilling” as we all remember too well. When I heard this promise made by then-candidate Joe Biden I was naive enough to believe that surely nobody would take that promise seriously. Boy was I wrong. It would certainly not be a stretch to say the current LNG pause is an attempt to appease those voters, whose passion for the environment has somehow not translated into them trying to learn about the energy needs of our world, but rather dictate to us what our energy future should consist of without that critical piece of knowledge.
I sincerely cannot even guess if Joe Biden thought that was something we could do, or if it was just more political speak. I did feel strongly that it was a mistake, as he was making a wild promise to a group of people who were already going to vote for him, that he could not possibly keep and would only pay for later. All that being said the current promise by now candidate Donald Trump of sub-two-dollar gas is an entirely different animal, but it will have the same impact on us in the oil and gas industry. Let me explain.
For one, politically speaking it’s a great terrible promise to make. Yes, I said a great terrible promise to make. You see after several years of gas prices being higher under Biden, of course, that’s a promise you make, it’s a complaint many American’s have. They also remember the lower prices under Trump, so naturally they believe he can pull it off, even though he likely cannot. The thing those people do not remember is that Donald Trump walked into office with low gas prices, and an industry still trying to recover from a devastating crash in 2015. They don’t remember that gas prices increased in his first and second year as President, and only dropped again from yet another crash at the end of 2018, and for some reason they have difficulty connecting the dots of gas prices during COVID.
At the end of the day, a second term for Donald Trump would not look like the first regarding gas prices. This is not the same industry it was even a few short years ago. Capital discipline is king, and OPEC would not be keen to increase production for him as they did in 2018, causing that crash. In addition we don’t have the refining capacity we did back then. Lower gas prices in today’s world, would take even lower oil prices than it did a few years ago. So short of of some deep and prolonged oil market crash, Trumps hands are pretty much tied when it comes to gas prices.
Ironically, or not depending on your perspective, the blame for continued gas prices above three bucks in a Trump presidency would fall on the same shoulders it always has, the oil producers. Yes there will be a lot of threats and bluster towards the middle east, and maybe even some harsh words for U.S. producers, but when it’s all said and done the two dollar gas will not come. It’s simply not in OPEC’s interest, it’s not in Russia’s interest, and it’s not in U.S. producer’s interest to oversupply a market in an industry that will spend the rest of it’s life under attack around the world. Simply put, gasoline is about the only product in the world that American’s think they should pay the same price for today, that they paid twenty five years ago.
So why exactly is it a great terrible promise to make? For starters, he doesn’t have to worry about seeking re-election, so there are no consequences for broken promises. Secondly, Trump supporters largely live in states with the lowest gas prices in the country already, so if those gas prices find themselves close to two dollars in Texas, even though they may be 2.79 on a national average, he can go ahead and claim victory. Heck, he may even stand on the deck of an aircraft carrier with a big sign behind him.
Realists understand that people running for office will make promises they know they're unlikely to be able to keep.
Did he lock her up?
Did he drain the swamp?
Did he build a wall and get Mexico to pay for it?
Did he fix health-care cartel pricing?
Despite these failures to deliver (some of which he clearly never intended to act on), he's still a far better choice than what we have now.