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Covid-19 Makes Foreign Policy the Oil Patch's First Biden Fear

America’s energy industry had been bracing for a potential shift away from the fossil-fuel-friendly Trump administration since last year. Then the Covid-19 pandemic hit, and President-elect Joe Biden’s potential actions affecting domestic oil-and-gas production seem to have lost their teeth in the near term. At the same time, his foreign-policy moves look more significant.

The extent to which Mr. Biden can push his clean-energy agenda will only become clear in January once the two pivotal Senate seats in Georgia are filled, but there are executive orders he can pursue without Congress on his side. Mr. Biden already has said he wouldn’t ban fracking outright, but he has called for ending its use on federally controlled lands.

A ban on new federal permits does have some potential for damage, though not any time soon. New drilling isn’t a priority for energy companies with prices and demand still depressed.

“It’s a very different discussion today than a year ago, when the U.S. was growing oil production one to two million barrels per day a year,” notes Scott Hanold, analyst at RBC Capital Markets. Even if West Texas Intermediate oil prices were sustained at $60 a barrel—they are around $40 today—annual oil production would be likely to grow somewhere around 300,000 barrels a day, “a far cry from the one to two million barrels per day you saw in 2018 and 2019,” he noted.

Instead, a more pressing near-term threat could stem from foreign policy. Mr. Biden favors returning to the 2015 Iran nuclear deal—a move that could bring the major oil producer sanctions relief. According to a research note from RBC, the White House has authority to issue enforcement waivers on sanctions without Congress if it certifies that Iran is meeting its nuclear deal obligations.

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