Trump vs. Harris: a perspective on oil prices
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Posted by MoneyController on 08.08.2024
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That Trump represents the best candidate as far as the oil market as a whole is not so obvious.
In an article in the Wall Street Journal, Jinjoo Lee argues that Donald Trump's victory in the November election would not necessarily be good news for the oil industry. At least in the short term. Indeed, promises to lift restrictions could lead to increased competition in the industry. The scenario of what could happen with a Trump victory was seen after the debate that showed Joe Biden's physical weakness and led him to drop out of the race: in that case, as Lee points out, the share prices of a large segment of oil companies rose, while the price of oil fell.
This apparent paradox - share prices linked to oil companies rising, while the price of the commodity falls - can be explained by the effect of a liberalisation of the market by Trump: more competition would mean an increase in investments, but also a fall in prices and a temporary decrease in the revenues of some of the market players (who would have their market shares taken away by competitors). If, on the other hand, Democratic candidate Kamala Harris wins the November elections, the restrictions would persist and the consequence would be an increase in oil prices, a decrease in investments, but also a temporary increase in profits.
Lee makes it clear that of course it is far more likely that the measures that Trump would approve (in favour of the oil industry) would tend in the long run to make the industry grow; conversely, the measures that Harris would approve (to the detriment of the oil industry) would tend to curb the growth of the industry, again in the long run.
The point is that - due to these and other variables - it is not necessarily the case that as far as the short-term specifically is concerned, Donald Trump's presidency would bring more benefit to the industry and, conversely, Kamala Harris's eventual presidency would bring more harm. One only has to think of how rising prices have so far brought the industry big gains in the context of the Biden administration, admittedly not very favourable towards the oil industry.
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