INSIGHT: Trump to pursue friendlier energy policies at expense of renewables

HOUSTON (ICIS)–Oil and gas production, the main source of the feedstock and energy used by the petrochemical industry, should benefit from policies proposed by President-Elect Donald Trump, while hydrogen and renewable fuels could lose some of the support they receive from the federal government.

• Trump expressed enthusiastic and consistent support for oil and gas production during his campaign.
• He pledged to remove what he called the electric vehicle (EV) mandate of his predecessor, President Joe Biden.
• Trump may attempt to eliminate green energy subsidies in Biden’s Inflation Reduction Act (IRA)

BRIGHTER SENTIMENT ON ENERGY
Regardless of who holds the presidency, US oil and gas production has grown because much of it has taken place on the private lands of the Permian basin. Private land is free from federal restrictions and moratoria on leases.

That said, the federal government could indirectly restrict energy production, and statements from the president could sour the sentiment in the industry.

During his term, US President Joe Biden antagonized the industry by accusing it of price gouging, halting new permits for LNG permits and revoking the permit for the Keystone XL oil pipeline on his first day in office.

By contrast, Trump has pledged to remove federal impediments to the industry, such as permits, taxes, leases and restrictions on drilling.

WHY ENERGY POLICY MATTERS
Prices for plastics and chemicals tend to rise and fall with those for oil. For US producers, feedstock costs for ethylene tend to rise and fall with those for natural gas.

Also, most of the feedstock used by chemical producers comes from oil and gas production. Policies that encourage energy production should lower costs for chemical plants.

RETREAT FROM RENEWABLES, EVs
Trump has pledged to reverse many of the sustainability policies made by Biden.

Just as Trump did in his first term, he would withdraw from the Paris Agreement.

For electric vehicles (EVs), Trump said he would “cancel the electric vehicle mandate and cut costly and burdensome regulations”. He said he would end the following policies:

• The Environmental Protection Agency’s (EPA) recent tailpipe rule, which gradually restricts emissions of carbon dioxide (CO2) from light vehicles.
• The Department of Transportation’s (DoT) Corporate Average Fuel Economy (CAFE) program, which mandates fuel-efficiency standards. These became stricter in 2024.

The EPA was expected to decide if California can adopt its Advanced Clean Car II (ACC II) program, which would phase out the sale of combustion-based vehicles by 2035. If the EPA grants California’s request, that would trigger similar programs in several other states.

Given Trump’s opposition to government restrictions on combustion-based automobiles, the EPA would likely reject California’s proposal under his presidency or attempt to reverse it if approved before Biden leaves office.

According to the Tax Foundation, Trump would try to eliminate the green energy subsidies in the Inflation Reduction Act (IRA).

These included tax credits for renewable diesel, sustainable aviation fuel (SAF), blue hydrogen, green hydrogen and carbon capture and storage.

In regards to the UN plastic treaty, it is unclear if the US would ratify it, regardless of Trump’s position. The treaty could include a cap on plastic production, and such a provision would sink the treaty’s chances of passing the US Senate.

For renewable plastics, much of the support from the government involves research and development (R&D), so it did little to foster industrial scale production.

WHY EVs AND RENEWABLES MATTER
Policies that promote the adoption of EVs would increase demand for materials used to build the vehicles and their batteries. Companies are developing polymers that can meet the heat and electrical challenges of EVs while reducing their weight. Heat management fluids made from base oils could help control the temperature of EV batteries and other components.

If such EV policies reduce demand for combustion-based vehicles, then that could threaten margins for refineries. These produce benzene, toluene and xylenes (BTX) in catalytic reformers and propylene in fluid catalytic crackers (FCCs).

Lower demand for combustion-based vehicles would also reduce the need for lubricating oil for engines, which would decrease demand for some groups of base oils.

Polices that promote renewable power could help companies meet internal sustainability goals and increase demand for epoxy resins used in wind turbines and materials used in solar panels, such as ethylene vinyl acetate (EVA) and polyvinyl butyral (PVB).

Insight article by Al Greenwood

Thumbnail shows the White House. Image by Lucky-photographer.