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Page added on November 15, 2016
Gauging the Trump effect on global commodities
There is perhaps no better reminder that the US presidency is a position of extraordinary power. Since the victory of US President-elect Donald Trump last week, businesses and governments have been working overtime to try to discern exactly what his presidency might mean for a range of important policy areas.
Across the world, every campaign statement, interview, tweet and early appointment by Trump’s transition team is now being carefully examined for clues as to how the newly-elected Republican will act once he moves into the White House.
The questions over the President-elect’s positions are more numerous than they would have been had Democratic rival Hillary Clinton triumphed. Trump has never held public office previously, and made many bombastic statements on the campaign trail that have so far been backed up by little in the way of detail.
Businesses operating in the commodities sector are every bit as hungry for information as others. Trump’s surprise victory has left many in the industry uncertain, puzzled and “scratching their heads over what to expect from this Washington outsider,” said Chris Newkumet, S&P Global Platts Bureau Chief in Washington, DC.
Newkumet spoke during a special Platts webinar, which was held November 11 to explore the possible ramifications of a Trump presidency for the oil, coal, gas, power and steel sectors. During the webinar, titled The Trump Effect: Energy, Commodities and Their Markets, senior Platts’ editors drew attention to many of Trump’s stated positions and sought to give a flavor of how the next four years could change commodities markets.
Of all the areas discussed, steel is the one in which the overall picture was most upbeat. Trump portrayed himself as a stout defender of domestic steelmakers during the campaign, ready to slap tariffs and countervailing duties on cheap imports as necessary. He also said he would double a five-year plan unveiled by Clinton calling for $275 billion in infrastructure spending, noted Joe Innace, Metals Content Director, Americas.
Look at other sectors, and the picture gets murkier. Trump has positioned himself as a supporter of the coal industry and is expected to abandon President Obama’s Clean Power Plan, which would necessitate some coal-to-gas switching. That may be interpreted as being broadly positive for coal and negative for gas in the generation mix. But due to current economics, it is unlikely to lead to either a sharp fall in the use of gas, or a large-scale reprieve for ageing coal-fired plant, said Jasmine Melvin, Editor of Inside FERC.
Trump’s enthusiasm for new oil and gas pipelines is shared with congressional Republicans and is expected to become a cornerstone of his new energy policy. Still, while this seems like good news for US exports, the outlook is complicated by his anti-free trade rhetoric, including a proposed renegotiation of NAFTA and his rejection of the Trans-Pacific Partnership.
When it comes to oil, Trump has promised to do all he can to boost domestic supply, roll back a host of regulations affecting the industry, and expand drilling in federal lands. But as Brian Scheid, Senior Editor, Oil News, said, it was unclear how some of these things would materialize. For instance, while Trump would like to expand drilling in federal waters, the Obama administration is shortly expected to unveil a five-year plan for oil leases and sales that could partially tie his successor’s hands.
More generally, expansions and contractions in US oil production tend to occur with little regard to changes in administration. Since Obama came into office pledging to tackle climate change and reduce the country’s dependence on fossil fuels, oil production had jumped by as much as 65%, Scheid pointed out.
The picture is certainly complicated, and the next four years will feature a host of other variables – including the state of the global economy, the level of the US dollar and worldwide geopolitical developments – that will complicate this picture further still. Even so, the discussion is thought-provoking.
One thing is certain: whatever effect the Trump administration has on global commodities markets, you can be sure it will be fully covered by Platts.
A replay of the webinar can be accessed here.
16 Comments on "Gauging the Trump effect on global commodities"
Revi on Tue, 15th Nov 2016 7:11 am
We’ll see a contraction of global economies, and less need for global commodities. No matter what Trump does he’s going to preside over the end of business as usual. He’s good at that, since he has presided over a gigantic failing business for many years now.
Davy on Tue, 15th Nov 2016 7:43 am
I think Trump will roll back some regulations and focus on a fiscal stimulus of some kind but without dramatic effect because of the current global debt levels. His own party will balk at too much more US debt. If rates go up that debt will be even more unstable. Trump has mentioned boosting defense spending but through cost cutting and efficiency. Cost cutting and efficiency have hit diminishing returns so little will happen there. If he wants to grow oil, gas, and coal he will have to write them checks. Fossil fuels are a global industry you can’t shape through national policy. You can influence it like what happen with the shale bubble but you can’t make the kind of changes people are imagining Trump may do. People would balk at overt cash subsidies to the fossil fuel industry. Regulations are already plenty beneficial from the Obama era. Coal is dead anyway at least as a growth industry. Coal will not be eliminated because it is not possible to eliminate it. Alternative replacing coal are a pipedream of the green left.
Trump is going to be more talk than substance on the economic front mainly because there is no basis for change. The global financial system is not going to accept more debt to the equation without a negative financial reaction. Trump cannot do too much protectionism without disrupting the symbiotic relationship of the US and China along with the emerging markets. If he pushes protectionism too hard a depression in global trade will result. Trade is already in a steady and dangerous decline.
The important point about Trump is he has checked the trend of increasing global centralization. Trade and policy was moving towards more globalization. That trend is now in doubt. It has not been stopped nor will it likely be because this trend is beyond any one man or country. There are no longer any powers that can unilaterally shape globalism as was the case in previous times. Globalism is a self-organizing and self-adaptive engine of growth entering the end of growth and diminishing returns to that growth. The environment we are in now of the end of growth will end globalism not Trump. That said we could see some interesting times because globalism is a Ponzi and Ponzi are driven by confidence. How much will the “Trump effect” affect global confidence? That is anyone’s guess now because I don’t think Trump and his people know exactly what they are doing yet. I don’t think they expected to win. This is as much a surprise for them as the rest of us.
rockman on Tue, 15th Nov 2016 8:34 am
“…the Obama administration is shortly expected to unveil a five-year plan for oil leases and sales that could partially tie his successor’s hands.” Just one more fool with one more foolish statement. President Obama offered more federal oil/NG acreage for lease during his term the has ever been offered during any other 8 year period in history. Every open lease in the GOM has been available to the industry. And the response from the industry was minimal: less the 5% of the lease blocks offered even received a bid.
Drilling the Arctic? The only wells drilled in the region in recent times were done with permits approved by President Obama’s administration.
Coal? President Obama’s plan to export more coal then the record amount already shipped during his administration was stalled by local west coast opposition. As an alternative he expedited expansion of Texas coal terminals. Now coal is being trained from Colorado to Texas. And for the first time coal from western leases (including govt leases granted by Obama administration) is being exported from the Gulf coast. BTW during the Obama administration 40% of US coal production is coming from govt leases…the highest % in history.
President-elect Trump can change all the regs he wants. But it ain’t going to change the geology.
Revi on Tue, 15th Nov 2016 8:44 am
Always great to get the real story Rockman! I think we are going to see a very different world during the Trump administration. It won’t be his fault, but it will probably happen during his watch.
rockman on Tue, 15th Nov 2016 10:37 am
Revi – Agree in general. President Obama got a lot of points for booming US oil production. But didn’t take a hit on those high oil prices inflicted upon us by those damn greedy Arabs…and ExxonMobil. LOL. Likewise big points for decreasing US coal consumption (with the MSM ignoring the fact that 40% of our coal production comes from federal leases managed by his administration). And at the same time the country set a new all time record for coal exports during President Obama’s second term.
During President-elect Trump’s time in office a variety of similar counterbalancing dynamics will likely occur. The big difference between the next 4 years and the last 8 will be the stories the MSM focuses upon.
penury on Tue, 15th Nov 2016 10:53 am
I think I will wait until after Trump is inaugurate prior to my judging what effect his “policies” will have. Remember, “Hope and Change”? How did that work out for you?
Truth Has A Liberal Bias on Tue, 15th Nov 2016 11:02 am
Hope and change didn’t help much.
Now it’s time for anger and change.
It won’t help much either.
Most Americans are fucking retards. Fat, lazy, retards that are getting fatter and lazier and more retarded each day. Maybe next election they will elect a retard.
Maybe we’ll get lucky and North Korea will EMP your ass. It’d be interesting to see 90% of you starve.
rockman on Tue, 15th Nov 2016 11:14 am
Truth – “Hope and change didn’t help much.” Sure it did: look at what the conservative got a week ago. Granted it took almost 8 years but the change they’ve been hoping for has finally arrived. LOL.
But as has been said many times: be careful what you hope for…you might just get it.
Davy on Tue, 15th Nov 2016 12:33 pm
Nice to know we have neighbors to the north like THALB. Truth has a retarded bias I have a hard time with your board name. It reminds me of a dumbass trying to be clever that ends up being stupid.
Apneaman on Tue, 15th Nov 2016 12:56 pm
What we need is a couple big graphs and charts with lots of colour of all the previous president elects and the all important effect they had on global commodities one week after their elections. Maybe CNN will get on it and drag out 900 “experts” to discuss the minutiae of this all important topic for the until the next mass shooting or whatever. Any Day now one of these nation obsessed non news networks is going to have an expert panel discuss and debate the world shattering importance of the ratio of undigested peanuts to undigested corn in the next big shit Trump takes……stayed tuned film at 11.
Plantagenet on Tue, 15th Nov 2016 2:11 pm
Rock man is right again. Obama was the drill baby drill president. He wouldnt say it—-he just did it
Cheers
Anonymous on Tue, 15th Nov 2016 2:53 pm
Plantatard…Stfu already. ‘Obama’ is exactly like you, he didnt do sweet fook all last 8 years. But in his defence, he is more articulate than you are, at least he has that going for him. Is what why you are obsessed with him? You both talk a lot, but say nothing of substance, and do absolutely nothing?
dave thompson on Tue, 15th Nov 2016 3:19 pm
Like all Presidents, Trump will do the bidding of the Corporate Banker Oligarchs. Yes there will be “Trump” policy changes. However, in name only. Because nothing of significance in Government policy comes about unless the true “owners” (Carlin) want it to happen. Trump is the perfect Corporate shill for the job. A brand, cartoon like figure, that is ruthless, loves power and does not give a shit if people are upset and suffering.
Anonymous on Tue, 15th Nov 2016 5:01 pm
the trump will soon learn the ‘power’ that come from being the ‘prez’, is nowhere near as great as what he imagines it to be. Obama probably felt the same way, for about the first month or so after he was given the job. Trump no doubt, ‘loves power’, like you say, but he wont have much of it to wield. He will have the prestige and status that comes with the job, even if the trappings of power in the WH are largely illusory, and he might be able to feather his own nest to a degree, but power? No.
If trump were one of the power elite, an ‘insider’ as it were, he would be able to wield actual power, like cheny did. But, hes a curious case, an ‘outsider elite’, so to speak, and an unwelcome one at that.
He is likely to find even the legal powers he does have to be severely limited by a hostile zionist elite. OR alternately, he could just make peace with them and do what hes told, as he predecessor did. The figurehead hes replacing made it through 8 years, alive, and will have a nice lucrative post-figurehead career doing as many book, movie, speaking, honorary w/e posts he can. If trump is as malleable as obomber was, he might live to collect that presidential pension plan as well.
Who knows?
rockman on Tue, 15th Nov 2016 6:43 pm
A – “If trump were one of the power elite…he would be able to wield actual power…” And that’s the big question, eh? I think about him being at the end of the game. Don’t you think he’ll be more focused on his “legacy” then most POTUS’s have? IOW he is free to politically cripple any R congressmen coming up in the next election cycle. Right now he is more then the POTUS IMHO: he is THE king of the US conservatives. Might not last for more then a couple of years. But think back to the comments he made about the other R nominees: would you want to be a congressman up in the next election and have pissed President-elect Trump off? Would you want him supporting your opponent…an R or D?
Essentially THE big question: will he try to be a “good party member” or will he slash and burn anyone, including his closest friends/supporters for the sake of his “legacy”? After all he was willing to do it to get the party nomination. What does he have to lose: the honest respect of the “elites”? He knows he doesn’t have it now. The R Congress if they don’t give him full support? President Obama didn’t have any support from an R Congress and still set ample precedence for using executive powers.
The exciting/scary thing about our new president is his ego. Lots of predictions. But no one really knows. Maybe the President-elect might not be 100% certain.
solarity on Thu, 17th Nov 2016 10:43 am
As Hofstadter avers, only weak leaders make decisions based on concern for their legacy.
Trump’s business empire seals his legacy. His Presidential decisions will be based on what he thinks is best for the country. Just like those made by all great Presidents.