This publication is part of AGSIW’s U.S. Presidential Election series.

The outcome of the U.S. presidential election will determine not only the United States’ energy policies but the fortunes of the Middle Eastern oil exporting countries. The opposing candidates have laid out their respective energy policy agendas, and there are stark differences between the two that will have ramifications for the Gulf oil exporters, the global climate agenda, and international trade relations.

With less than a month before Americans go to the polls to elect a new president, the global oil market is in turmoil because of geopolitical developments in the Middle East. The risk of an oil price shock should Israel target Iran’s energy infrastructure in response to Iran’s October 1 missile attack would have repercussions beyond the region. Oil prices immediately surged to register the highest weekly increase in more than a year after the October 1 attack, as the market braced for Israel’s response. Any further increase in the price of oil might influence voters come the U.S. election in November with the incumbent Democratic Party at risk of being penalized at the polls if there is a spike in U.S. gasoline prices.

Higher oil prices at a time when inflationary pressures are subsiding would also have an impact on the global economy and raise concerns for the energy security of import-dependent countries that were caught out by Russia’s invasion of Ukraine in February 2022. At the time, international sanctions crimped Russian oil exports, and Moscow responded by curtailing gas flows to the European market. This sparked a record increase in gas prices, and oil prices came close to an all-time high.

If there is one thing the Republican and Democratic parties agree on when it comes to energy policy, it is the issue of energy independence for the United States. But each party has a different approach as to how this should be achieved.

Republican Energy Agenda

Former President Donald J. Trump, the candidate for the Republican Party, has not shifted his stance on energy policy since his first term in office. In his campaign speeches and manifestos, Trump has reiterated his promise to open up more acreage to oil and gas drilling, grant approval to stalled oil pipeline projects, build new oil refineries and nuclear reactors, and remove the red tape that he says has held back the oil, gas, and coal industries.

The Republican Party’s campaign platform reflects his thinking: “Republicans will increase Energy Production across the board, streamline permitting, and end market-distorting restrictions on Oil, Natural Gas, and Coal. The Republican Party will once again make America Energy Independent, and then Energy Dominant, lowering Energy prices even below the record lows achieved during President Trump’s first term.”

Trump’s own agenda, in which he touted his pro-U.S. energy policies, calls for a withdrawal by the United States from the “horrendous” Paris Climate Accord that was reinstated by President Joseph R. Biden Jr. He also slammed the Democrats’ Green New Deal to tackle climate change as benefiting China.

These policies might slow the pace of the U.S. energy transition to renewables, such as solar and wind, but they would not reverse it entirely. Some states have benefited from the clean energy incentives and subsidies provided by the Biden administration through the $2 trillion Inflation Reduction Act. Of the Gulf Arab states, the United Arab Emirates, Saudi Arabia, and Oman have invested heavily in the green economy and will pursue their energy transition programs regardless.

Democratic Energy Agenda

Although the Biden administration adopted a more climate-friendly energy policy and promised to curtail oil and gas drilling, U.S. oil production has increased, rising to a record high since the end of the Trump presidency in 2021. The United States today produces more than 13 million barrels per day, having overtaken Saudi Arabia and Russia as the world’s top oil producer. It is also the world’s largest exporter of liquefied natural gas, ahead of Australia and Qatar.

The position of Democratic presidential hopeful Vice President Kamala Harris is not so well articulated, and the Democratic policy manifesto has not been modified since Biden dropped out of the race in favor of Harris in July. During the September 10 presidential debate and in subsequent public remarks, Harris said that she would not impose a ban on hydraulic fracturing or fracking applied to extraction of oil and gas from shale rock. This was a reversal of her position during a previous, brief presidential bid. But she has given no indication that a Harris presidency would dilute the environmental policies of the Biden administration and the Inflation Reduction Act that spurred investment in renewable energy and clean technologies.

Harris said during the debate that her “position is that we have got to invest in diverse sources of energy, so we reduce our reliance on foreign oil. We have had the largest increase in domestic oil production in history because of an approach that recognizes that we cannot over rely on foreign oil.”

Trump retorted that if Harris won the election, the Democrats “will go back to destroying our country, and oil will be dead, fossil fuel will be dead, and we’ll go back to windmills, and we’ll go back to solar, where they need a whole desert to get some energy to come out.”

The Democrats, in their more detailed policy platform, have touted the energy achievements of the Biden era, during which they have attracted more than $400 billion in private sector investments in wind, solar, and battery storage projects across 47 states and created 300,000 new jobs while lowering energy costs for millions of Americans. “It puts us on track to triple clean-energy generation by 2030, reducing Big Oil’s hold on our economy, protecting families from wild price swings, and bringing America closer to energy independence than we’ve been in over 70 years.”

The World of Energy

But Trump’s pro-fossil fuel policy and both candidates’ talk of energy independence do not take into consideration changes in the balance of power in the world of energy, with the OPEC+ alliance accounting for around 41% of oil supply while the United States is the biggest oil producer, and the realities of the energy transition. They also ignore the fact that Gulf Arab states, including Saudi Arabia, the UAE, and Qatar, are now heavily invested in the U.S. energy sector in oil refining, LNG, and low carbon energy projects.

At the COP28 United Nations climate summit in Dubai in late 2023, the United States was among 200 countries that pledged to contribute to global efforts “to transition away from fossil fuels in energy systems, in a just, orderly and equitable manner.” Participants also called for tripling global renewable energy capacity and doubling energy efficiency by 2030, which the Democratic policy platform says is on target in the United States.

U.S. oil production today is just 1 mb/d or so above the previous peak of 9.6 mb/d in the 1970s before output began to decline and made the United States heavily dependent on foreign oil, including large volumes from the Middle East. U.S. net imports rose from 2 mb/d in 1970 to around 10 mb/d in 2000, at a time when Saudi Arabia was one of the top-three suppliers of oil to the U.S. market, according to U.S. Energy Information Administration historical data. The Arab oil embargo of 1973 was a wake-up call that exposed the U.S. vulnerability, but it took years to turn around the flagging U.S. oil and gas industry.

By the end of the 1970s, Saudi Arabia was exporting more than 1.4 mb/d of crude oil to the U.S. market, according to the EIA. By the early 1990s, Saudi oil exports to the United States rose to more than 1.8 mb/d but have since declined dramatically. In July, Saudi Arabia exported just 280,000 b/d to the United States, while fellow OPEC member Iraq exported 202,000 b/d, according to EIA data. Canada is by far the biggest supplier of crude oil to the U.S. market.

China is now the largest importer of crude oil, mostly from the Middle East, though Iran, Russia, and the United States also supply the Chinese market. Oil demand growth in China is among the key factors that influence prices and supply-demand balances as U.S. import dependence has declined since the start of the decade.

In 2023, U.S. oil imports from the 12 members of OPEC, which is dominated by the Arab oil producers, totaled 1.34 mb/d, half the level of imports in 2018. The reduction in imports has been because, since 2008, U.S. oil production has more than doubled, driven largely by growth in the shale oil patch.

This growth allowed the United States to hike its oil exports, which in 2023 reached a record 4.1 mb/d at a time when the OPEC+ alliance, led by Saudi Arabia and Russia, was withholding supply to prop up sagging oil prices. This in effect meant that the OPEC+ producers ceded market share to U.S. and other exporters that are not members of the OPEC+ alliance. The 22 members of OPEC+ account for around 40% of global oil supplies. At the current level of production, the United States alone accounts for 20% of global supplies, currently running at around 102 mb/d.

On September 26, Financial Times reported that Saudi Arabia was ready to abandon its “unofficial” target of $100 per barrel for crude oil to claw back market share. Whether that signaled an intention to engage in a price war to inflict pain on other producers, noncompliant OPEC+ members or U.S. shale producers, was not clear. Neither Saudi Arabia nor OPEC have an official oil price target, though if it came to a price war, the lower-cost Gulf Arab producers would have an advantage over the higher-cost producers of U.S. shale and offshore oil. But that edge has been narrowing as technology and new drilling techniques have lowered the cost of shale oil production, making it that much harder for rival producers to compete. In the weeks after the Financial Times report, the price of oil leapt from just under $70/bbl to more than $81/bbl on fears of a wider escalation of the conflict in the Middle East despite the oil market being fairly balanced with supply sufficient to meet tepid global demand.

Trump’s Quest for Energy Dominance

Trump has claimed that U.S. oil production would have been “five times, four times, five times higher,” had he remained in office. With some 6 mb/d of available global capacity currently sitting idle, half of it in Saudi Arabia, there would have been no room for additional oil without triggering an oil price collapse.

Although, as president, Trump established a close relationship with Saudi Arabia, the first country he visited shortly after taking office, his pledge to increase U.S. oil and gas production is a direct challenge to Riyadh and Washington’s other Gulf Arab allies.

Trump’s quest for energy dominance, however unrealistic, could also backfire if it hits the bottom lines of U.S. energy companies. If elected, the former president has promised to reverse Biden’s ban on new drilling on federal land on day one. But that won’t mean that new oil would come gushing out immediately, as it takes several years for greenfield projects to materialize, and there is no guarantee that there will be demand to absorb additional barrels if demand peaks by the end of the decade, as the International Energy Agency and leading think tanks have forecast.

Gulf States in the U.S. Market

Oil and gas are traded in an increasingly globalized market, and the national oil companies of the Gulf Arab petrostates, including Saudi Aramco, the UAE’s Abu Dhabi National Oil Company, and Qatar’s QatarEnergy, have become more active players in upstream and downstream energy projects across continents, including in the Americas.

In the United States, Aramco has been present in the U.S. oil refining sector for decades. Aramco, through its wholly owned subsidiary Motiva Enterprises, is 100% owner of the Port Arthur refinery in Port Arthur, Texas, the largest refinery in the United States, with capacity to process 630,000 b/d of crude oil.

In the past year, Aramco has turned its attention to overseas LNG projects in Australia and the United States. In June, Aramco signed a heads of agreement for a 20-year sale and purchase agreement with Sempra for 5 million tons per year (mt/y) of LNG from the planned Port Arthur Phase 2 U.S. export project, with the agreement covering a potential 25% stake in the 13 mt/y phase. That same month, the Saudi energy giant announced that it had entered into a nonbinding, 20-year offtake agreement with NextDecade for 1.2 mt/y to be supplied by the proposed Train 4 at the Rio Grande LNG Port of Brownsville in Texas.

Saudi Arabia, through its Public Investment Fund and Aramco, has also entered into partnerships with U.S. companies to research and develop carbon capture and petrochemical technologies, which benefit from the billions of dollars that the Inflation Reduction Act provides for investments in low-carbon energy projects.

QatarEnergy holds a 70% stake in the Port Golden Pass LNG export terminal in partnership with ExxonMobil with 30%. The facility is due to be operational in 2025 with capacity to process 18 mt/y of LNG, making it one of the largest LNG plants in the world. The plant will have access to ample, low-cost U.S. gas and allow it to diversify its supply sources and geographic reach.

The UAE was a latecomer to the U.S. market, but it has established a joint venture with the United States under the Partnership to Accelerate Clean Energy, a $100 billion initiative that aims to deploy 100 gigawatts of clean energy globally by 2035 with a focus on solar and nuclear energy as well as carbon capture technologies.

In May, ADNOC said it had taken an 11.7% equity stake in Phase 1 of Rio Grande LNG, a NextDecade-operated project in Texas with planned capacity of 17.6 mt/y. ADNOC acquired its stake through the existing equity holding of Global Infrastructure Partners, and the company could take an equity stake in proposed Trains 4 and 5 at Rio Grande LNG, subject to a final investment decision for the project expansion. ADNOC also announced a preliminary 20-year offtake agreement for 1.9 mt/y from proposed Train 4 at Rio Grande LNG. The partners called the deal “ADNOC’s first strategic investment in the US.”

In September, ADNOC announced that it would acquire a 35% equity stake in ExxonMobil’s proposed low-carbon hydrogen and ammonia production facility in Baytown, Texas. The facility expects to convert U.S.-produced natural gas into virtually carbon-free hydrogen, with around 98% of carbon dioxide removed.

U.S. Energy Policy and Gulf Hydrocarbon Producers

The relationship between the Gulf Arab oil exporters and the United States has evolved and become more intertwined. While the Gulf states generally consider themselves loyal political and military allies of Washington, they have become more assertive in their foreign policies – policies that have been boosted by piles of cash amassed during the periods of high oil and gas at the start of the decade.

Over the next few years, as the global energy transition accelerates, the relationship between U.S. energy policies and Middle Eastern oil-exporting countries will be crucial. Whether through partnerships in low-carbon projects or competition in oil and gas markets, either way, the outcome of the U.S. presidential election will play a pivotal role in shaping both domestic and international energy policies.