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Trump signs order on oil drilling but market is skeptical

The industry is not going to commit huge amounts of capital if the outlook for crude oil prices is not clear

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As he approaches his first 100 days in office, US President Donald Trump signed an executive order on April 28 that could lead to expansion of drilling in the Arctic and Atlantic oceans.

“Today, we’re unleashing American energy and clearing the way for thousands and thousands of high-paying energy jobs,” AP quoted Trump as saying at the signing ceremony. The order also calls for a review of regulations overseeing drilling and former President Barack Obama’s five-year drilling plan.

Interior Secretary Ryan Zinke told reporters at a White House briefing on April 27 that this order would cement US position as a global energy leader and foster energy security for the benefit of American people. He claimed that it would not remove any of the stringent environmental safeguards that are currently in place.

This follows Trump’s executive order on April 26 when he directed Zinke to review national monuments designated by previous presidents under the Antiquities Act of 1906. The order could roll back the borders of protected lands and make them accessible to drilling and mining.

Fadel Gheit, a senior energy analyst at Oppenheimer in New York told New Europe on April 28, that given that oil prices are not likely to go higher than $60 per barrel and lower than $40, Trump’s executive orders do not mean that there will be an acceleration in oil drilling.

“Not at all. At the end of the day, no matter what he does, it is the market that dictates capital spending. It’s not what government wishes. If it’s not profitable, they’re not going to pursue it,” Gheit said. “The industry is not going to commit huge amounts of capital if the outlook for crude oil prices is not clear. Right now it could not be foggier because nobody knows what’s going to happen. Shale producers in the US are accelerating their drilling activity, they’re gaining a lot of momentum, they’re lowering their cost,” he said, adding that this has a negative impact on supply and demand and will depress oil prices unless or until the Organization of Petroleum Exporting Countries (OPEC) cuts production in order for prices to move higher.

Meanwhile, Trump on April 26 praised Zinke of “doing an incredible job” and never overlooking the details. “The previous administration used a 100-year-old law known as the Antiquities Act to unilaterally put millions of acres of land and water under strict federal control — have you heard about that? Eliminating the ability of the people who actually live in those states to decide how best to use that land. Today, we are putting the states back in charge. It’s a big thing,” Trump argued.

The US President accused the previous administration of bypassing the states to place over 265 million acres of land and water under federal control “through the abuse of the monuments designation”. “In December of last year alone, the federal government asserted this power over 1.35 million acres of land in Utah, known as Bears Ears — I’ve heard a lot about Bears Ears, and I hear it’s beautiful — over the profound objections of the citizens of Utah. The Antiquities Act does not give the federal government unlimited power to lock up millions of acres of land and water, and it’s time we ended this abusive practice,” Trump said.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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