Will Donald Trump’s ‘liquid gold’ pitch reshape global energy markets?

“Leave the oil to me,” US President-elect Donald J. Trump said in his victory speech, hinting that he has big plans for what he referred to as “liquid gold.”

With his upcoming presidency, Trump seems to signal towards a new era of American protectionism. Throughout his campaign, he remained ardent in his rhetoric (and resolve) to increase import tariffs across the board in an attempt to bolster domestic manufacturing and production. On occasion, he has even gone as far as suggesting a 20% blanket tariff on all imported goods. This rhetoric isn’t restricted to just raw materials and consumption goods, but could also possibly apply to the wider energy supply that powers American homes, transportation and manufacturing.

Will American oil gain at the expense of global oil?

Trump stated that America holds much more “liquid gold” than any country, “more than Saudi Arabia, and Russia”, he said. Given this statement, coupled with his intent to enforce harsh sanctions on Iranian oil (similar to his approach with Venezuelan oil in his first term), one can safely assume that the upcoming Trump administration will look to make the most of American oil supplies, while simultaneously squeezing the demand for non-American oil.

The election result (along with a looming hurricane in the Gulf Coast) triggered significant selling activity, causing global oil prices to drop by more than $2 per barrel. However, they quickly regained ground and at the time of writing, Brent Crude Futures stood at $75.21 per barrel (up by 0.39%) and the West Texas Intermediate (WTI) Crude stood at $71.87 per barrel (up by 0.25%).

Potential decoupling of American and global oil benchmarks?

Brent is more reflective of Europe, Middle East and Africa (EMEA) oil prices and WTI of American oil, but they are closely correlated. Typically, Brent and WTI prices move in tandem apart from times of localised aberrations, such as disruptions in key oil-producing nations in the Middle East or logistical issues with American pipelines. However, Trump’s intent to significantly increase domestic oil production while stifling global oil demand could disrupt the harmony between global and American oil.

As per the Energy Institute Statistical Review of World Energy 2023, the United States was the largest oil consumer in the world, accounting for 19.1 million barrels per day. In comparison, China and India (the next two biggest oil consumers) accounted for 14.2 million and 5.2 million barrels per day, respectively. Out of its total consumption, the US imported 43% or 8.3 million barrels per day primarily from the EMEA region. Arguably, this steady American demand for foreign oil is the glue that holds Brent and WTI benchmarks together.

Trump’s intent to massively curtail US oil imports in an era of increasing sanctions and geopolitical tensions (especially in the Middle East) could potentially bring global oil markets into flux. If his policies see the light of day, we could see a change in paradigms, where oil prices would depend more on localised demand and supply factors rather than global crude benchmarks.