Bush victory could boost Big Oil, analysts say
Date: 03-Nov-04
Country: USA
Author: Deepa Babington
Though the outcome of the U.S. presidential election is unlikely to have a radical or immediate impact on the energy sector, few doubt that President Bush's policies will do more to help Big Oil than his Democratic challenger Senator John Kerry, who remains largely an unknown to the sector.
Much of that boils down to their fundamental difference in dealing with sky-high oil prices: Bush's policies are focused on tackling the supply side of the oil equation, largely by boosting efforts to find new sources of crude, while Kerry's initiatives target demand by promoting energy conservation and reducing dependency on foreign oil supplies.
"The Bush White House believes that high commodity prices should direct investment flow to supply and distribution infrastructure," said James Lucier, an energy policy analyst at Prudential Equity Group. "In other words, the function of high prices is to direct investments that will have the effect of increasing supplies, thereby providing market discipline for those prices."
Bush, for example, is in favor of reducing regulation to open up federal land for exploration and drilling and opening up the Arctic National Wildlife Refuge for oil production.
The president, who has been pushing for broad, sweeping national energy legislation backed by the oil industry since he came into office four years ago, is also expected to make another pass at the energy bill if reelected, J.P. Morgan analysts said in a recent research report.
Of course, his Texas roots and having Dick Cheney, the former head of No. 2 oilfield services company Halliburton Co. (HAL.N: Quote, Profile, Research) as his vice presidential candidate, don't hurt either. Over the past year, Halliburton been accused of winning billion dollar U.S. government contracts for work in Iraq through political pull. It denies the allegations.
"Given his background, he has a better understanding of the oil industry and how it works," said Bob Ebel, chairman of the energy program at the Center for Strategic International Studies, a Washington-based nonpartisan think tank.
"Kerry and the Democrats are usually viewed as anti-big business and would be less sympathetic to the needs of the oil industry and probably a bit less understanding of how the oil industry really works," Ebel added.
HIGHER OIL PRICES?
More importantly, some such as J.P. Morgan argue that a Republican administration could be more supportive of higher oil prices - the ultimate harbinger of how oil stocks perform - because of a foreign policy that is more proactive on the war on terror.
Oil prices - which have already shot up 60 percent to hit highs over $55 a barrel this year over fears of supply disruption - will creep up further if the U.S. launches fresh attacks that heighten political uncertainty in the Middle East.
On the other hand, some energy analysts predict oil prices may fall as much as 10 percent next year if Kerry were to win, since he is expected to follow a less aggressive Middle East military policy and is in favor of halting shipments into the U.S. Strategic Petroleum Reserve - a 670-million-barrel fuel stockpile to be used in times of emergency.
Kerry may even tap into U.S. heating oil reserves in a bid to ease prices, said Ebel.
In any case, analysts say oil companies will find little comfort from the Massachusetts senator's thrust on energy conservation and a focus on pushing up use of renewable fuel sources instead of oil. He is also expected to pursue policies favoring stricter environmental controls.
To be sure, the two candidates do overlap on some energy issues, such as supporting the construction of the Alaska natural gas pipeline and expanding liquefied natural gas facilities.
And with the exception of a drastic shift in foreign policy or use of strategic reserves, most energy initiatives spearheaded by both candidates take long lead-times to come into effect so any immediate change in the energy landsca
