HOUSTON—David Wasserman, U.S. House editor for the nonpartisan Cook Political Report, said that the result of the upcoming presidential election—which he said could be called “the ‘Brangelina’ election because our country is headed for irreconcilable differences”—unequivocally will impact the country’s broader energy industry and its oil and natural gas sector.

Although this election cycle features “the most unpopular Republican nominee in history; in fact, in both parties,” Wasserman, speaking at the 2016 Deloitte Oil & Gas Conference on Sept. 21, pointed out that “most of the country is enjoying close-to-$2 gas. The latest leading household income reports show a modest 5.2% growth nationally in the last year. And we don’t have a president engulfed in scandal like we’ve had in other second-term administrations.”

As this unprecedented political maelstrom batters the nation, several experts at the conference discussed how global geopolitics and national and international regulations will continue affecting energy in general and oil and gas in particular.

David Knapp, chief energy economist and senior editor for global oil market analysis at Energy Intelligence Group, reminded the attendees that the world still is dealing with a low-oil price environment.

Technology including horizontal drilling and hydraulic fracturing played a role in, but did not cause, the oil price collapse that followed the shale boom, Knapp said. When domestic shales in source rock were discovered and effectively produced, first in gas and then in oil, the Atlantic Basin was flooded with light, sweet crude. This geologic, organic disruption caused the oil price decline, he continued.

Saudi Arabia

This low-price environment isn’t disappearing soon. Knapp said that Oil Market Intelligence, which he edits, takes the view opposite many, including the U.S. Energy Information Administration and OPEC, that there was still a surplus of product in third-quarter 2016. The surplus will linger into 2017, which is not a positive, he said. “So [market] rebalancing is later rather than sooner.”

Amid the 24/7 flurry of information—related to energy, the election and everything else—Saudi Arabia is one country to watch: the kingdom has recently undergone changes in royal leadership, and Knapp pointed out that the still-eagerly awaited market rebalancing is intertwined with the recent IPO of Saudi Aramco.

Saudi Arabia sits on what is potentially the “largest stranded asset” of oil and gas resource in history, Knapp said. Knapp said that the kingdom’s effort to transition from dependence on an oil economy is intertwined with its leadership.

“I think they are one and the same. Converting the oil into other assets, you have to take it out of the ground first. … Higher oil prices are a bad thing for the market for oil … they raise a lot of concerns in consuming countries.”

Saudi Arabia is more concerned with oil volumes rather than prices, and has realized at a critical time that volumes can be key. Knapp said that the oil price downturn occurred before the December 2015 Paris Agreement on climate change, which contains policies hostile to fossil fuels and oil production. Those policies have collided with the shift in prices.

Saudi Arabia’s Defense Minister Mohammad bin Salman’s efforts to benefit the economy through efforts that include privatizing parts of Aramco are “inspired,” Knapp said, noting that if the lower tier of the Saudi population were allowed to participate, they could be especially successful.

“They’re trying to convert those assets and they’re willing to produce at above-maximum efficient rates because they don’t want oil in 2040 or 2050. Oil isn’t gone, but it isn’t as good as people thought it was going to be, he said, referring to when the climate accord rules were set.

Future Demand Drivers

Middle East geopolitics and Saudi Arabia’s innovation efforts aside, the role of the world outside the West in energy’s future is undeniable. Kenneth B. Medlock III, senior director at the Center for Energy Studies at Rice University, said that the biggest driver in the future will be growing demand from the developing world, although overall, there will be no imminent peak in world demand.

This future demand will be for all forms of energy, not just oil and gas, he said. India, China and other parts of Asia and Southeast Asia are developing nations with low per-capita income and some current rate of energy consumption.

“At even modest rates of economic growth over the next 15 years, you’re going to see upwards of 500 million people in that part of the world alone move into the middle class,” he said, noting what comes next: “we start thinking about purchasing consumer durables” including:

• Automobiles
• Refrigerators
• Air conditioners

These, and more, consume energy.

He noted some statistics relating to the Organisation for Economic Cooperation and Development (OECD), which includes the U.S. and 34 other developed nations. 1.3 billion people comprise the OECD out of 7.4 billion people on the planet. Of that latter number, 6.1 billion consume less energy; of that number 1.3 billion are in energy poverty, “the lack of access to modern energy services,” Medlock said.

With its embarrassment of modern energy services, on the other hand, the U.S. will never escape regulations, which will be swept along the complete shift in political administration that is about four months away.

Christopher A. Smith, assistant secretary for fossil energy at the U.S. Department of Energy (DOE), summarized the goal of the climate accords that have been held under the outgoing administration.

During negotiations over the Paris Agreement, “the [Obama] administration’s aspiration and expectation was that maybe 50, maybe 60 countries would step forward with their new initial nationally determined contributions—the plan that they’re going to implement to reduce greenhouse gases in order to address climate change—And the outcome was, 190 countries stepped forward with a plan.”

Smith said that, very broadly, the goal of the climate accords is to ultimately have a world in which the increase in average temperatures is limited to just 2 degrees.

This regulation—and any others for the U.S. oil, gas and other energy sectors—will simply have to wait for the next presidential administration.

Under the next administration, the DOE will remain as a taker of regulations, an influencer of regulations and a maker of regulations, as Smith described it.

Erin Pedigo can be reached at epedigo@hartenergy.com.