Critical Resource advisors and other leading experts reflect on the implications of Trump’s presidency for energy and resource companies globally.
The immediate impact of Trump’s presidency on some commodity prices has been a welcome surprise for many mining groups, and a bullish domestic energy policy has given oil and gas producers encouragement for the years ahead. However, policy uncertainty on US relations with Asia and Africa, and likely roll-backs on transparency and climate change, are viewed with concern by many observers.
We asked trusted experts in our network for their views on how President Trump’s policies are likely to play out and how they could impact mining and energy firms in the US and internationally. The article focuses on some of the policy areas in which the direction is most uncertain, including energy, transparency, climate change and US international relations with Africa and Asia.
“The Trump administration appears to be siding with fossil fuels, but individual US states are unlikely to reverse the trend away from coal towards cleaner fuel.”
Ian Henderson, former head of JP Morgan’s Natural Resources Fund
“As promised during the election, the new administration appears to be siding with the fossil fuel industry, including coal. Nevertheless, US states are unlikely to reverse the trend towards cleaner fuel. The current administration is not likely to withdraw outright from the Paris climate agreement, and individual states are not expected to reverse the trend toward cleaner transportation. The current administration is likely to be supportive of energy security policies and of onshore shale exploration and exploitation. Restrictions on oil and gas exports could be eased.
In the long run, the US will continue to play a major role in matters related to energy and the environment, however the emerging world is where the growth in demand for energy comes from. Clearly the citizens of cities of the emerging world want more cars, more power and less pollution and will follow developments to limit emissions elsewhere.
Longer term, energy companies will need to adapt to a multi-fuel transport fleet. Integrated businesses are already putting electric charge points in petrol stations, and even hydrogen fuel points are being installed. At the same time, there will still be demand growth for fossil fuels, even coal, in the emerging world. Doubtless the new administration will likely put fewer obstacles in industry’s way. Companies would be mistaken to imagine that in the future there will not be more competition on every front, and obviously production levels from OPEC and Russia will materially affect short- and medium-term oil and gas prices. Similarly coal, uranium and other energy sources can’t escape the laws of supply and demand.”
“Today, an unsupportive White House is not as damaging to global efforts to combat climate change as it would have been 10 years ago.”
Connie Hedegaard, former EU Commissioner for Climate Action. Connie was a member of the Advisory Panel for Critical Resource’s ‘The Heat is On’ climate change initiative
“Internationally, it’s hard to see the US playing the role that it has for the past 2-3 years, but that leadership is also fairly recent. It was really only the Obama administration that put any weight behind the climate change agenda. China will most likely seize the opportunity to fill the gap that the US leaves behind. The world has moved significantly over the last ten years, meaning that an unsupportive White House is not as damaging now to efforts to combat climate change as it would have been previously.
Domestically, America’s overall carbon trajectory will be heavily dependent on Trump’s infrastructure agenda. Trump is promising a modernisation of American infrastructure but we’re yet to see exactly what that means. The American energy system really needs an update – this should be sought across state boundaries to create a more efficient and cost-effective system. Within the US, California and other progressive states will likely continue to take big steps forward. In that case, it’s possible that the international community would look to other levels of government to work with on these issues.
The big question going forward will be how the US will implement its commitments to the Paris agreement without the tools it requires, many of which Trump is removing. That threatens the credibility of the Paris agreement more generally. If the Chinese and the Europeans work together, that could be enough to keep the momentum going.”
Relations with East Asia
“Whatever happens, the unpredictability of Trump’s policies is likely to lead to more countries in East Asia hedging their bets by seeking closer relations with China.”
Bill Emmott, former Editor-in-Chief for the Economist and member of Critical Resource’s Senior Advisory Panel
“The Trump administration’s emerging economic and foreign policies look likely to impact business decisions and the investment climate in East Asia in three main ways: by raising the likelihood of trade conflicts between the US and China; by facilitating an accommodation between Japan and Russia which could unlock substantial investments in natural resources and related infrastructure; and by forcing a rethink of trade and investment rules within the wider Asia-Pacific economy.
It is US-China trade friction that has the highest potential as a game-changer. President Trump’s senior appointments indicate serious intent to pursue aggressive trade policies. While messages have been confused over whether his cabinet will designate China as a “currency manipulator”, determination to impose steep countervailing duties or other border tax measures appears much clearer. How this plays out – in terms of retaliation by China, World Trade Organisation rules, or lobbying by US global businesses – is unknown. But it carries evident risks of negative impacts on the Chinese economy and on the cross-border supply chains of US and other multinationals.
Accommodation between Japan and Russia, which both governments have been seeking for some time as a way to balance China in the region, would have more of a long-term impact. There is not likely to be any resolution of the two countries’ post-1945 territorial dispute, but the release of major resources investments could well occur in the near term, especially if international sanctions on Russia (which have made investment financing problematic) are eased.
The abandonment by the US of the Trans-Pacific Partnership has effects that are more uncertain and abstract in nature. But, depending on the nature of potential trade conflicts, this may open the way for a more China-centred regional trade pact. Whatever happens, the unpredictability of Trump’s policies is likely to lead to more countries in the region hedging their bets by seeking closer relations with China.”
Relations with Africa
“The clear bottom line is that, even more so than in previous administrations, Africa will not be a priority.”
Eric Benjaminson, former United States Ambassador to Gabon and Sao Tome. Among other roles, Eric is a Senior Advisor to Critical Resource
“One of the clear bottom lines is that, even more so than in previous American administrations, Africa will not be a priority. Policies may not be wildly different than those of the Bush administrations, but the perceptions and the rhetoric in both directions could be easily misunderstood and fraught with tensions. This will be a mixed bag for natural resource firms: companies of US nationality may be more popular in some of the human-rights challenged countries where oil firms operate (Equatorial Guinea, Mauritania, Angola) because Trump’s focus will be on business. Some of these countries may believe that the nexus between Trump’s business interests and political views may make their situations more malleable. It may make things more challenging in forward-leaning countries like Senegal, Ghana and Namibia.
Trump will clearly do what he can to restrict immigration, particularly of Muslims. Such efforts have already begun. This will create tensions with heavily Muslim states who have been friendly to the US (Nigeria, Senegal, Mali, Kenya). Whatever dialogue he chooses to have with those African powerhouses will be coloured by statements that he has already made. He will have to work to differentiate his views on Islamist extremists from his views on Muslims in general. His general desire to tighten immigration laws will meet with an unfriendly reception across the continent, and especially from Nigeria which produces the greatest number of immigrants to the US from African nations.
Trump has stated that he will be more active in going after terrorist networks, while at the same time staying out of nation-building scenarios. This will likely mean strengthened security and intelligence cooperation with relevant African militaries, especially in nations like Nigeria, Cameroon and Kenya that are beset with terrorism inside their borders. Count on a larger role for US Special Forces and the CIA.”
“The oil companies which pushed for the repeal of US transparency legislation may have won the battle but will likely lose the war.”
Bennett Freeman, former US Deputy Assistant Secretary of State for Democracy, Human Rights and Labor. He is now Chair of Global Witness’ Advisory Board and is also a Senior Advisor to Critical Resource
“The news of Dodd-Frank Section 1504’s apparent demise is all too real but the rumors of its death may be exaggerated. The repeal, forced through the hitherto obscure Congressional Review Act, compels the SEC to rewrite the rule substantially, but does not abrogate the revenue payments law embodied in 1504 itself. So a fight looms to maintain its essential thrust even if its sharpest points – such as the degree of project-level reporting and the provision for country-specific exemptions – may be blunted in a final revised rule.
The oil companies which pushed for the repeal under the banner of the American Petroleum Institute (API) may have won this battle but will likely lose the war. Even with a weakened, revised SEC rule, the onus will be on US-based oil companies to disclose their revenue payments consistently and credibly through the Extractive Industries Transparency Initiative (EITI) – and in turn on the EITI to maintain its project-level disclosure standards. Civil society groups around the world – and the responsible investors which have supported mandatory disclosure – will exert pressure through the EITI and on the major jurisdictions such as the UK, the EU and Canada to maintain their reporting requirements.
The fight against corruption and the resource curse – and the fight for transparency and accountability as a means to advance that broader end – will ultimately prevail with or without a new rule still consistent with the original bipartisan legislative intent of 1504. Yet its global momentum will be slowed as the US steps back and the battle moves into the EITI and beyond.”