“Christmas came early for the oil-and-gas industry,” said Bob McNally, president of consulting firm Rapidan Energy Group.
‘Mother-of-all gut punches’
The resurgence makes sense given that US oil prices climbed 27% in November, marking one of the best months ever. (The record was set this past May when crude spiked 88% after crashing below zero the month before).
“When people want to put on risk, they go to the most beaten-up sectors first,” said Daryl Jones, director of research at Hedgeye Risk Management. “Energy was the most washed-out sector.”
The pandemic set off an unprecedented collapse in energy demand, with millions of Americans stuck at home. Energy profits plunged, job cuts mounted and share prices cratered.
“For the oil industry, Covid was the mother-of-all gut punches,” McNally said.
The hope is that highly effective vaccines, once distributed, will encourage more mobility. And more people flying and driving is a prerequisite for a full recovery in the energy industry.
But the energy rally isn’t solely about vaccines and reopening the economy.
No blue wave
Investors are also breathing a huge sigh of relief that Democrats failed to sweep the election — an outcome that looked to be in the cards just a few months ago.
A blue wave — on top of a pandemic — would have been disastrous for the oil industry because Democrats vowed to ramp up regulation to fight the climate crisis.
“That’s not dodging a bullet,” McNally said. “It’s dodging a cannonball right at their head.”
If Democrats had taken decisive control of the US Senate, they would have been primed to pass sweeping climate legislation. The biggest threat to Big Oil would have been stripping tax breaks from the fossil fuel industry.
“The stars were aligned to take a bite out of the oil-and-gas industry’s balance sheet. That now goes away,” said McNally.
Even if Democrats sweep both run-off races in Georgia next month, control of the US Senate will be a 50/50 tie, with Vice President-elect Kamala Harris breaking any…
Read More: The oil industry narrowly avoided an election disaster. Now it’s showing