Belcher: Energy Policy Outlook for 2024

A new year brings with it new opportunities and new realities. In the world of energy, it is enormously complicated. In the U.S., the political situation makes it even trickier.

Here at home amid a spate of retirements and an expulsion, the Republican grip on power in the U.S. House of Representatives has diminished as its majority has gotten even smaller, while Democrats cling to the narrowest of majorities in the U.S. Senate. These slim margins, while perhaps useful at times in preventing actions that would be adverse to the energy sector, also represent a constant threat to the passage of legislation that could be beneficial.

These tiny margins are resulting in gridlock. Given the current dynamics, where it will be hard enough just to pass a bill to keep the government open, no one should expect much in 2024 in the way of major legislation. Although Senate Energy and Natural Resources Committee Chairman Joe Manchin (D-W.Va.) and Ranking Member John Barrasso (R-Wyo.) remain hard at work on a bipartisan permitting bill, reaching consensus will be difficult.  Furthermore, even if an agreement is made on the substance of such a bill, there will be few, if any, opportunities to find legislative vehicles for moving it.

Prior to their adjournment in December, House Republicans were focused on policy initiatives that would bring new life to oil and gas production on federal lands, while Democrats focused on legislative solutions that would address the nation’s aging transmission grid. Both sides are seeking permitting reform, but focused on different sectors of the energy complex.

Additionally, 2024 is a presidential election year, which will further highlight major differences between the two parties on energy and environmental policy as they seek to lock up their respective political bases, further complicating prospects for the passage of energy legislation.

International events, such as the war in Ukraine, Russia’s influence in OPEC and the Middle East and China’s global ambitions, are setting the stage in terms of energy’s role in geopolitics. This tension and the need to support our European allies with LNG supplies, helps make the case for the continued U.S. production of record amounts of oil and gas for the world.

At the same time, the commitments made by the United States and other countries at the COP 28 climate conference, while falling short of phasing out fossil fuels altogether, attempt to set a course for significantly reducing consumption and production of oil and gas. This sets up a real conundrum for the U.S., which is setting records for oil and gas production, and LNG and crude oil exports. In fact, U.S. exports are countering the impacts of OPEC+ production cuts and are softening the effects of the cutoff of Russian natural gas supplies to Europe.

This creates a tricky situation for President Joe Biden, who is suffering from some of the lowest poll numbers of his career. How does he satisfy his climate-focused Democratic base voters and support continued U.S. oil and gas production and exports, which are thus far preventing a surge in oil and fuel prices?

Assuming that both parties’ current front-runners are nominated, energy and climate can be expected to be dominant themes. Donald Trump will emphasize the need for U.S. “energy dominance” and focus on offshore and onshore federal leasing, pipeline permitting and regulatory reform.  He, along with Republicans running for Congress, will also seek to paint Biden and the Democrats as weak on domestic production and attack their climate and environmental policies as hurting U.S. production and helping U.S. adversaries like China, Russia and Iran. Expect Republicans to highlight decisions to nix the Keystone XL Pipeline and nearly eliminate oil and gas leasing in the Gulf of Mexico.

Biden will call for weaning the nation off of fossil energy and focus on renewables, the benefits of the Inflation Reduction Act and being a global leader in addressing the climate crisis. However, Biden will need to be more nuanced in his approach to oil and gas, so as not to make himself vulnerable to attacks about high energy prices.

The most likely outcome is a close presidential election, won in a few key battleground states, and continued tight margins in the House and Senate. Along the way, we can expect a rigorous debate about oil and gas, climate and the environment. One thing is for near certain, however: the state of the American economy and prices on goods and services in the months ahead will play a major role in the election outcome.