Trump’s prospective energy team is a mixed blessing for Gulf

• Fossil fuel veteran energy secretary
• US production boost could hit price
• Likely to impact renewables drive

The nomination of a fossil fuels veteran and climate sceptic as US energy secretary is likely to chime with Gulf expectations that the second Trump administration will aggressively promote oil and gas as integral parts of the energy mix, according to industry observers.

On Saturday President-elect Donald Trump named Chris Wright, the boss of fracking firm Liberty Energy, to lead the US Department of Energy.

Wright rose through the ranks of the domestic energy industry and does not appear to have any links or prior experience in the Gulf. 

The new White House’s expected green light to domestic producers to boost oil output may however create pricing challenges for GCC countries, especially Saudi Arabia. 

“Middle East leaders appear to be happy politically, but economically they are less likely to be so because if it’s ‘drill, baby, drill!’ or an equivalent sort of policy. That means continued weak oil prices – and that’s what they don’t want,” says Simon Henderson, director of the Bernstein Program on Gulf and energy policy at The Washington Institute.

In a week-old LinkedIn post, Wright criticised what he described as the left’s “climate religion” and “top-down” approach to addressing global warming, claiming it was already “collapsing under its own weight”.

He advocated in Real Clear Politics in August for “zero energy poverty,” a policy that would target all elements of US energy to improve Americans’ standard of living. He has said that increasing energy production is critical to lifting billions of people out of poverty. 

“I think his approach to expanding energy for development rather than a crisis approach to ending fossil fuel use is very attractive and similar to Gulf views of creating an all-access energy system, with growth across energy products, both traditional and renewable,” says Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy. 

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In an indication of possible strong ties over the next four years, Yasir Al-Rumayyan, who chairs Saudi Aramco and heads the kingdom’s Public Investment Fund, attended an Ultimate Fighting Championship event on Saturday night in the company of Trump and Elon Musk.

Trump nominated Wright, who will require Senate confirmation, after naming North Dakota governor Doug Burgum to lead the Interior Department and chair a new National Energy Council. 

Trump separately appointed Steven Witkoff, a real estate tycoon and close confidant, as Middle East envoy. Witkoff is a vocal Israel supporter who has had business dealings in New York with the Qatar Investment Authority and Abu Dhabi’s Mubadala.

Wright and Burgum are expected to support drilling in the US, though it is unclear how far they can push. 

The US is the world’s top energy producer, having for the past six years produced “more crude oil than any nation at any time” with an average of 12.9 million barrels per day in 2023, according to the US Energy Information Administration. This record is “unlikely to be broken” any time soon, the agency said in May. 

“I do see the Trump administration removing environmental regulations, but actual new investment will be shaped by price and demand,” says Rachel Ziemba of Ziemba Insights in New York.

“I anticipate actual new volumes will underwhelm political ambitions.”

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Opec+ members are again set to decide on their planned unwinding of production cuts at the group’s next meeting in December. Meanwhile, Saudi Arabia is reportedly considering abandoning its support of oil prices in favour of flooding the market to regain share. 

Kristian Coates Ulrichsen, co-director of the Baker Institute’s Middle East Energy Roundtable, says that Saudi officials are trying to manage production levels through Opec+ and that a sustained increase in US production could cause friction. 

“But the patchwork nature of private US energy ownership means that the government is less able to directly influence commercial decisions, if at all, and that therefore any change in US production is likely to be slow and manageable, from a Gulf point of view,” Ulrichsen says.

Investment opportunities

At the time of writing, Brent crude hovered just above $73 a barrel and WTI crude just below $69, having been relatively stable over the past few weeks.

“Another potential plus for some in the GCC – the Trump team will probably be more open to investment in the US including in the energy space,” Ziemba says.

She says that Qatar and UAE in particular are looking for investments in the US. Saudi Arabia is also willing, but she says it is “increasingly focused at home and will invest abroad when key to economic and strategic goals”.

A US administration that is again friendly to fossil fuels could prompt GCC governments to change their tune on renewables.

“I think they will almost certainly be reconsidering their messaging,” Henderson says.

“In the initial stages, instead of an abrupt 180 degree turn, there may just be less emphasis on certain things in order to make them seem more compatible with US policy.”