Trump or Biden, which president is in favor of the petroleum giants?

As the American presidential election heats up, the US petroleum and gas industry CEOs should be careful what they wish for.

After coming to power, Joe Biden, the Democratic President of the US, widely supported the development of green energy and decarbonization of the country's economy. In contrast, Republican Donald Trump pursued a policy of encouraging increased petroleum and gas drilling and has reportedly promised energy lobbyists whatever they want if their companies support his 2024 presidential campaign.

But the remarkable thing is that the fossil fuel industry was much better off during the Biden presidency, in terms of profitability, stock performance, and production, than it was during the Trump period. In fact, some of Trump's policies may end up repeating the same oversupply that kept consumer prices low during his presidency, and as a result, led to financial losses for petroleum and gas companies.

The Giants' poor record under the former president

Trump has reportedly hosted petroleum executives at his private mansion in Maralago and listened to their complaints about the Biden administration's draconian regulations. The reality is that Biden has increased the cost of drilling on federal lands, imposed new requirements to reduce methane emissions, halted the process of issuing new gas export permits, and taken other measures that make it more expensive and difficult to extract fossil fuels.

However, the petroleum and gas industry has not suffered much. According to the statistics of the S&P Capital IQ intelligence platform, the average profit margin of the energy industry in 2023 reached 11.3%. Wall Street forecasts for 2024 are similar. Based on this, the average profit margin of the energy sector during the four years of Biden's presidency was around 11%.

During Trump's four-year presidency, the profit margin of the energy industry was basically zero, and this includes 2020, when the outbreak of the Corona pandemic caused travels to stop and petroleum prices to fall. Excluding 2020, the average energy profit margin was only 4.5%. In each of the four years of Trump's presidency, energy profits have been lower than during the years of Biden's presidency.

ExxonMobil, America's largest energy company, reflects the performance of the entire industry. The company had high profits in 2008, but its net income declined sharply in the 2020s. Then, in 2020, Exxon lost $22.4 billion. This petroleum giant recovered from this loss and in 2022, it showed a great performance, earning $55.7 billion.

The president's policy overshadowed by market factors

Like many elements of the economy, the impact of each president's policies on the energy sector has been much less important compared to what is happening in global markets. Around 2012, during the Barack Obama period, the hydraulic fracturing revolution caused a boom in American petroleum production. It had nothing to do with what Obama had done and the boom was due to new technology and high private sector investment.

Over the next decade, drilling companies focused on growing market share by assuming greater profitability. This increase in production made America the largest producer of petroleum and natural gas in the world. The OPEC+ petroleum producing countries increased their production in order to regain market share, which caused the price of petroleum and gas to decrease.

But the low price for consumers cost the profitability of drilling companies. From 2015 to 2020, the US energy sector had the worst performance among 11 industries in terms of profitability.

The crisis of 2020, during which petroleum prices turned negative for a short time, changed this industry. Since then, drilling companies and their investors have prioritized profitability and invested less in new capacity. However, U.S. petroleum production climbed to new record highs during the Biden period, largely due to high prices that made higher production attractive. Unlike the 2010s, instead of flooding the market with supply to support their share, the OPEC+ countries kept their production limited to keep prices high.

Trump has reportedly promised petroleum executives that he would cancel many of Biden's green energy regulations and make favorable measures for fossil fuels, such as speeding up drilling permits and agreeing to more extraction from federal lands. In contrast, Trump wants the energy industry to inject $1 billion into his 2024 presidential campaign. Trump also wants lower energy prices for consumers and may find that energy companies prefer less production and higher prices to more production and lower prices.