on Global Oil Markets?

The administration of President-elect Donald Trump could impact the global oil supply, flow, and demand

through various economic and geopolitical policies. Regarding global oil demand, the upcoming US

administration could directly impact the economic growth and oil demand of both the US and China.

Raising or introducing new import tariffs on China, similar to those in 2018 and 2019, will certainly pose

a significant challenge to the already slowing Chinese economy and increase the downward risk to its

oil demand in 2025. However, China might respond by evading tariffs through intermediate countries

for their targeted products/materials to export to the US. This would lead to less efficient trade flows

likely consuming more oil in the long run.

on Oil Policy on Inflation?

For US oil demand, the initial reaction to corporate tax reductions is likely to be positive for stock prices

and investment, potentially leading to a higher pace of GDP growth and increased oil demand. However

leaving more tax money in circulation is inherently inflationary. Additionally, imposing higher taxes on

imports from China will further contribute to inflation. China’s expected trade retaliation, targeting

specific sectors to make US consumers feel the inflationary impact of a trade war, will exacerbate this

issue. This could result in the Federal Reserve facing inflation upticks in 2025, potentially delaying its

move towards full normalization of interest rates. Such a scenario could be particularly harmful to the

US housing sector and small businesses, leading to a plateau in GDP and oil demand growth, which

would ultimately be bearish for oil prices.

on US Oil Production

Regarding US oil production, the administration might reduce corporate taxes for US companies

providing more cash that could be reinvested in boosting oil production. Additionally, granting more

access to federal land and water for oil exploration and production could lay the groundwork for

a future increase in US oil supply. However, these policies cannot guarantee a significant rise in oil

production similar to the shale boom of the early 2010s, which saw US oil production surge from less

than 5.5 mbpd in 2010 to 12.3 mbpd in 2019. This time, it is not expected that shale producers will direct

most of their revenues towards upstream investment. Instead, they are likely to continue focusing on

deleveraging and paying dividends back to investors amid fierce competition for investment among

S&P 500 companies.