The oil industry spent much of Joe Biden’s first week in office publicly squawking in protest. The American Petroleum Institute called his decision to cancel the Keystone XL pipeline a “significant step backwards both for environmental progress and our economic recovery.” And in response to Biden issuing a 60-day halt on new leases and permits for drilling on federal land, API warned that “the administration is leading us toward more reliance on foreign energy,” and that any restrictions on production will decimate the fragile U.S. economy.
But the business press and industry analysts have presented a rather different story. Oilfield services companies are cautiously optimistic, after a rash of bankruptcies last year. The combined prospects of an economic stimulus and infrastructure package—both of which will boost fossil fuel demand—spell a more prosperous 2021 and 2022 for the world’s biggest polluters. Even Biden’s aspirations to “Build Back Better” with green jobs, Oslo-based energy consultancy Rystad Energy predicted last week, may well be welcome news to oil and gas producers. “Any ‘green’ focus of the infrastructure bill,” a company press release read, “will be mostly additive to overall short-term oil products demand due to construction activity, with risks mostly limited to medium-term oil demand, depending on the scope and success of the projects.” Stimulus measures, in other words, will increase energy demand in general. At least for now, that means more demand for fossil fuels. They call it the “Biden boost,” predicting an extra 350,000 barrels per day (bpd) for 2021 and 900,000 bpd for 2022, should he follow through on his promises. They do also note that new environmental rules, if carried out, could cause oil demand to start to fall toward the end of the 2020s.
This may seem counterintuitive given Biden’s campaign promises. The mechanism isn’t complicated, though: There’s a stubborn link between growth in gross domestic product and greenhouse gas emissions. Even the greenest of recoveries is likely to boost both growth and emissions in the near term by putting people back to work and boosting consumer spending. Unless economic recovery policy includes sweeping, rapid changes to electrify and decarbonize the country and actively curtail fossil fuel production, even a stimulus that’s green on many other fronts could help emissions climb for years to come.
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