A frenzy of speculation built across the energy sector in the US as the country went to the polls after a long and contentious campaign season. In contested counties in Ohio and Florida, early voting ran ahead of 2008 levels but analysts, energy voters and much of the world were settling in for an extended process of determining the president of the US.
In Austin, Texas where Breaking Energy has been covering the US Association for Energy Economics North America conference, the looming election was a subject of acknowledged importance, with both conference sessions and off-line discussions focusing on what the future would be like under an Obama or a Romney presidential term. At the same time, convention attendees speaking to Breaking Energy largely expressed relief that the campaign race might soon be over, and that they would be able to turn to meaningful long-term investment and market questions.
Sixty percent of national voters polled by CNN as they left the voting booth said the economy was the most important issue in the election. The energy business has been an unusual bright spot in the US economy over the past four years, and expectations among USAEE attendees was that investment could even accelerate into the next presidential term. For more on that story, read “As Election Nears, Energy Sector Prepares for a Pivot.”
Despite the volume of the debate over energy in the election this year, many of the long-standing structural issues in the energy sector have actually been addressed in recent years and those issues at play in the next presidential term are so complex and difficult to parse that prediction on subjects like the Production Tax Credit for wind energy becomes near-impossible, attendees at USAEE said.
Low energy demand and the surge in domestic natural gas and oil production have kept prices from surging and limit the potential for sweeping changes to market fundamentals in the immediate wake of the election.
Part of the focus of the election cycle on the presidential race to the exclusion of other contested races is because of underlying assumptions that the makeup of the Congress will not change. At the same time, early indications from the Romney campaign on energy were that states could take a leading role on permitting and other energy policy, running counter to increased regionalism in the energy markets in recent years and a significant departure from decades of consolidation of energy regulation under federal authority.
Electricity markets are one example of increased regional coordination in the energy sector in the US in recent years, former Federal Energy Regulatory Commission chairman and self-proclaimed Republican Pat Wood III told Breaking Energy this week. “When I joined FERC, the states were really at war with the federal government” over energy policy in the wake of Californian market failures, Wood said, and in the years since FERC has followed a more general US trend of putting in place regional market structures to address energy supply issues.
Significant Issues Still at Stake
Two exceptions to the general sense of “wait and see” among the economists interviewed at USAEE were environmental policy and taxes.
“The people over at EPA have got to be nervous,” one development official who asked not to be identified told Breaking Energy at the USAEE conference. The federal environmental agency has been under fire from the Romney campaign, and has a number of outstanding regulations and information gathering efforts underway with potential widespread impacts on fossil fuels. Utility regulators have warned of potential blackouts if some of those regulations move ahead under current plans, for more on those predictions read “Rolling Blackouts to Come From EPA Rule Schedule, Claim Power Companies“.
“A critical issue [in this election] is CAFE review in 2016 and who is president [at that time] might affect what happens at review,” Executive Director for Energy and Sustainability at UC Davis Amy Jaffe told Breaking Energy at USAEE.
“Energy security is strengthened by CAFE standards, so if Gov Romney wins and holds to his stump position that he would do away with CAFE, it could reduce our long-term energy security. And the opposite would apply if President Obama wins,” and maintains or increases vehicle fuel efficiency CAFE standards, Jaffe said.
For more on CAFE standards, read “The American Economy Does Not Have an Oil Addiction“.
The complex issue of tax policy as it impacts oil companies and green energy firms was the subject of some of the more convoluted moments of the presidential debates, when sparring statistics underlined the difficulty of reworking the current system. But with a ballooning federal government deficit and – more immediately – a looming “fiscal cliff” in the federal budget process kicking off directly after the elections this month, tax policy as it impacts energy firms is expected to be a major component of anticipated tax code revisions in 2013.