Kamala Harris and Donald Trump have notably different views on energy. Whoever wins the US election on November 5th could have a meaningful impact on Canada’s economic growth outlook. Energy exports represent ~5% of Canada’s GDP and we have reached record levels in recent months.
Trump’s ideology of US energy independence will be back in focus if he wins the election. While his ‘drill baby drill’ comments may sound exciting to some Canadians, it could be an overall negative to our oil economy and Canadian oil producers. Energy independence means Trump wants the US to produce more oil and gas. To achieve this, he will likely expand leases, reduce regulations, approve increased drilling activity and might even enact a “national emergency” declaration to achieve a “massive increase” in domestic energy supply. This would likely have implications on global oil supply, oil prices, and likely reduce oil imports from Canada. There are two reasons that may ease the level concern for Canadians though. First, Canadian oil will remain in demand as a significant proportion of US refining capacity is set up to process the heavy oil that Canada produces in abundance and which the US does not produce much of. Secondly, US shale producers have adopted a higher level of production discipline in recent years with the focus on shareholder returns being more important than any encouragement from the White House to pump more oil at all costs.
Harris, although no longer supporting a blanket fracking ban, is likely to impose more stringent regulations on US oil and gas (as well as coal, power producers, and mining). This could be a net benefit to Canada for the opposing reasons stated above.
Trump also seeks to build out energy and power infrastructure, including building pipelines, refineries, traditional power plants, and nuclear reactors. This could be beneficial for Canadian energy infrastructure companies with US exposure and for Canadian power producers and utilities with US exposure.
The two presidential candidates have vastly differing policy views which can have a wide-ranging impact on various areas of the Canadian market. Current polling data indicates that regardless of which candidate gets elected, we could likely see a split congress, which would mean that enacting drastic changes based on either candidate’s stated policies will be a difficult endeavour.
Thank you to Kapil Bapat, and Sunny Singh, CFA from RBC’s Portfolio Advisory Group, for sharing their research and content with me for my blog.
- Brad Weatherill
