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The contrarian case that Biden would help oil companies in the near-term

Joe Biden certainly isn't who the oil industry wants to win the presidential election — as their political spending shows — but he might be the leader the ailing sector needs.

Why it matters: Biden is vowing new emissions regulations and new restrictions on production as part of plans to hasten a transition away from fossil fuels — but what that means for the industry and markets isn't cut and dry, some analysts argue.

What they're saying: Let's start with a new column by Bloomberg's Liam Denning ("Why Big Oil Should Vote for Joe Biden.")

  • He says GOP opposition to action on climate does nothing to help the industry navigate the lower-carbon world — and political transition — that's coming one way or the other.
  • "The industry faces a choice between getting on board with a smoother transition, with more emphasis on market-based solutions, or keeping with Republicans’ maximalist, but minority, position until political fortunes inevitably change — at which point mandates like California’s gasoline-car ban will drop like bricks," he writes.
  • "The first option entails risk management; the second is a gamble with lengthening odds."

The intrigue: Denning points out that if Biden wins and Democrats regain the Senate, a Green New Deal-style revolution isn't in the offing.

  • But the sector should expect climate measures "more along the lines of an actual transition rather than abrupt disruption."

Where it stands: There are also reasons to think Biden could support oil prices in the nearer-term by effectively imposing a more disciplined production outlook, a Goldman Sachs note this week said.

  • "We do not expect the upcoming U.S. elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be in fact a positive catalyst," the note says.

Reality check: They're not saying Biden would be a lasting friend at all. They see him creating "headwinds" to production and imposing climate policies that are ultimately negative to demand.

  • But in the near term, his infrastructure and stimulus plans would lead to higher demand in the coming years than currently expected, they write.

What they're saying: Goldman's not alone in this nearer-term assessment.

  • Rystad Energy's Artem Abramov, speaking recently to S&P Global Platts, argued that Biden’s nonenergy policies, like easing U.S.-China trade tensions and taking more effective steps to control COVID-19, would have bullish spillover effects for oil.
  • And back to Bloomberg's Denning: "[A]dult management of the Covid-19 crisis and a large economic stimulus, along with tighter restrictions on fracking on federal land and methane emissions, could support oil and gas prices from both the demand and supply side, at least in the short term."

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