Daniel Fine

Daily Times energy columnist

President Trump before and after November has been consistent — executive orders by Obama on oil and gas regulations have been voided. These regulations were under the climate change energy policy umbrella that opposed fossil fuels as energy sources in the United States. His appointments in the two energy power bureaucrats are in place to roll back more regulation and discrimination (through tax treatment and limiting access to public land).

Both factions of the fragmented Democratic Party (progressives and left-of-center) support having internal bureaucrats drag out orders within the Department of Interior and the Environmental Protection Agency to abandon the climate change energy policy on which they are the primary sources of task orders. In other words, agency internal defiance of the Trump Administration. Climate change careerists reject the regulatory rollback.

This is an impasse, a post-election rejection of the legitimacy of President Trump as an elected President is setting in with tactics and strategy – with an eye toward the 2018 legislative elections. It is a two-year war of resistance. Will the Farmington Office of the Bureau of Land Management speed up the application process for petroleum drilling – faster or the status quo? Will San Juan Basin oil and gas operators monitor performance or simply resign themselves to the status quo or holdover resistance?

Price and geology are at work statewide as New Mexico oil and to a lesser degree natural gas output edges higher. Will OPEC and Russia allow West Texas Intermediate oil production to replace their market share? There is no way for Saudi Arabia, the highest volume oil producer in OPEC to fail — the stakes are whether Saudi Arabia can modernize and diversify from oil dependency to investment management. A failure defined by OPEC chaos and a sharp fall in the price of oil to the mid-$30 range would destabilize the Kingdom of Saudi Arabia.

The Trump administration has not approached a new energy policy. There is in financial terms a market adverse to risk and in contrast to an American oil first policy. So far, American oil first has not registered in the share prices of American oil producers. And demand projections for oil are in a consensus range of 1 percent growth per annum. American shale oil producers are expected to be accommodated by OPEC and Russia for part of that 1 percent. The expansion of supply through the lifting of American sanctions against Russia because of Ukraine/Crimea will not take place. American producer interest is in support of sanctions because indirectly Exxon production in Russia along with Rosneft would drop the world price of crude.

The Trump administration will approach Saudi Arabia through warnings. America supports the modernization of society movement in Saudi Arabia. Unlike the last 30 years, however, such events should not ratchet up the price of oil mainly because of the positive shale oil short-term supply capability.

It is the objective of the 2015 New Mexico energy policy to advance new markets for the state's natural gas. Mexico imports 3.6 trillion cubic feet a year of natural gas and needs more. This adds up to an opportunity for San Juan Basin as well as Delaware Basin. Inevitably, Mexico and New Mexico natural gas mutual trade interests will prevail. Natural gas from the San Juan Basin Is cheaper for Mexico than Asian liquid natural gas imports. This is a story about the border that appears least understood.

There is room for special events in world geopolitics that should drive oil prices higher in a minimum of three trading days — a security or military intervention in the South China Sea in and around oil shipping lanes from the Middle East; a ballistic missile from North Korea to Alaska; a financial market sell-off from inflationary excess in credit; a final Brexit for the British followed by German and French nationalism; and the Saudi Kingdom collapse and its impact on the Middle East.

Market curbs, margin calls, and bank capital ratios exposure will trigger a downside “cascade” of selling in oil and oil-related company shares. Heavy debt ( junk bonds) company shares will be at risk, and possibly at fatal risk. It is not yet clear what the Trump administration will do in such circumstances, but we cannot count on a response similar to the Obama administration's response to the recession of 2009. Watch the volatility index and passive investment programs or index activity to provide the direction.

Daniel Fine is the associate director of the New Mexico Center of Energy Policy at New Mexico Tech and an energy policy analyst for the New Mexico Energy Minerals and Natural Resources Department.