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Biden win may throttle US oil production, push up prices to $55 a barrel

According to a Goldman Sachs research note, a Biden-Democratic party win would be “a positive catalyst” for crude prices.

Published: 17th October 2020 11:29 PM  |   Last Updated: 18th October 2020 08:38 AM   |  A+A-

Democratic presidential candidate Joe Biden

Democratic presidential candidate Joe Biden (Photo | AP)

Express News Service

NEW DELHI:  The US Presidential elections could make things costlier for India in one way at least: crude oil.

While the summer’s record low prices helped India save over Rs 5,000 crore via cheap oil imports, analysts note that if Joe Biden wins, oil prices may start moving upwards again.

According to a Goldman Sachs research note, a Biden-Democratic party win would be “a positive catalyst” for crude prices.

“Headwinds to US oil and gas production would rise further under a Joe Biden administration, even if the candidate has struck a centrist tone,” the bank’s analysts believe.

Biden has taken a vocal stand against increased shale mining in the US, and Motilal Oswal Financial Services (MOFSL) analysts say that a Biden administration could lead to more regulatory oversight and costs for the shale sector— not just a clamp down on production.

“Biden also says taxpayer costs can be recovered by repealing the generous tax bonanza that Trump granted US fossil fuels. Forecasts suggest that taxes could increase costs by as much as $5 per barrel,” MOFSL analysts noted.

Brent oil, which forms a large part of India’s crude oil basket, currently trades at $43 per barrel, and WTI crude at around $41 per barrel.

However, if President 

Donald Trump retains the Presidency, experts believe his pro-shale and pro-fossil fuel stance would essentially mean business-as-usual-keeping prices range-bound in the near term. However, a Biden-win might take WTI to as high as $55 per barrel.

India, in the midst of an economic crisis worsened by the Covid-19, has been fortunate on the oil prices front. While prices have recovered from their April lows of $16 per barrel, they remain nowhere close to the $60 per barrel level recorded at the beginning of this year.

The low prices have led to savings in import costs and higher taxes have funneled the gains into central and state government coffers-even as income from other sources has slowed to a trickle.

Higher crude prices would choke off this cash flow and weaken the already strained exchequer, unless governments decide to hike taxes. But, a win by the Democratic party might also lead to the opposite.

Biden has taken an opposite stance to Trump on the sanctions on Iran and Venezuela.

“If sanctions are pulled off, they might re-emerge as significant oil exporters... This might put pressure on prices,” says MOFSL.



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