It is probably no shock to anyone that the oil industry donated more to the Republican Party than to the Democratic Party during the last presidential election. According to an August 2023 report from Statistica, Republican Donald Trump received $3.7 million in campaign donations from oil and gas companies compared to the $1.6 million Democrat Joe Biden received. After all, Republicans tend to support favorable tax policies for the industry and fewer regulations.
What might be a surprise, however, is that in the last 75 years, the success of the industry has had very little to do with the political affiliation of the sitting president.
That is the message that Matthew Silverman, a geological consultant and the EXPLORER’s own Historical Highlights editor, wants to share at the International Meeting for Applied Geoscience and Energy in August in a planned presentation called, “Crude Awakening: The Presidents and the Oil Patch.”
There is “a surprisingly poor correlation in the past few decades between the health of the petroleum industry and the party in power in the White House,” he said. “Presidents matter a lot less to the oil and gas industry than the things politicians cannot control, like prices and technology, pandemics and wars, and weather and business cycles. History suggests that support for a presidential candidate based on his embrace or rejection of the oil industry is a poor electoral strategy.”
As an avid history buff of American presidents and the oil and gas industry, Silverman has taken a deep dive into researching presidents’ connections to the industry and their administrations’ effect on oil and gas – or lack thereof.
Presidents and Petroleum
In the 1950s, oil supplies grew under Republican President Dwight D. Eisenhower, with the passing of the Federal Aid Highway Act of 1956 – which aimed to expand the nation’s highway system and promote the growth of the automotive and petroleum industries.
Yet he also enacted the 1959 Mandatory Oil Import Quota Program, which restricted the amount of imported crude oil and refined products. Although its goal was to reduce the United States’ dependence on foreign oil and protect national security, the program angered major oil companies that owned reserves overseas. According to Silverman, imposing such quotas was an “antithetical” move for a Republican.
Democratic President Lyndon B. Johnson maintained deep connections to Texas oilmen and contractors.
“He benefitted from their support throughout his political career and passed his largesse to grateful Democratic congressional candidates from around the country,” Silverman said.
His greatest financial backers were Herman and George R. Brown of Brown & Root, now part of Halliburton.
During Johnson’s 1963-69 term, he upheld an incentive for oil companies to explore and produce while deducting part of their gross oil income to account for the natural decline of oil reserves – a move that disgruntled those in favor of reforming the tax code and increasing tax revenue from oil and gas.
Republican President Richard M. Nixon showed an openness to the oil industry, but during his 1969-74 administration, the country experienced its first major decline in production. When Nixon left office, production was down 1.3 million barrels per day, despite the 1968 discovery of Prudhoe Bay, North America’s largest onshore, conventional oilfield. His administration approved the controversial 800-mile Trans-Alaska Pipeline System to bring the oil to market, yet also created the Environmental Protection Agency, which would increase regulations on the industry.
Republican President Ronald Reagan abolished the Nixon era’s freeze on prices and wages that negatively affected domestic production, reduced corporate tax rates and repealed the 1980 Crude Oil Windfall Profit Tax. These changes provided significant incentives for exploration and production.
At the same time, however, Reagan applied pressure on Saudi Arabia to increase oil output to weaken the Soviet Union – a move that triggered a 70-percent price drop in crude oil that led to the 1986 collapse of the oil industry.
Prior to becoming president in 1989, Republican George H. W. Bush was personally involved in the oil industry working for Dresser Industries, which manufactured oilfield products, and served as president of Zapata Off-Shore Company (which later merged with Pennzoil), which owned and operated drilling rigs in the Gulf of Mexico and internationally.
However, the oil industry saw its largest decline in production – nearly 1 million barrels per day – during any one presidential term under his administration, Silverman said, citing low crude prices, production declines from mature fields, environmental and regulatory concerns and a shift from domestic to foreign investments.
Republican President George W. Bush also had close ties to the industry prior to being elected, and his 2001-09 administration actively supported oil and gas. Prior to the Iraq War, the Energy Policy of 2005 included incentives for upstream operations, including on federal lands, and refinery expansion. The act also promoted drilling cost tax deductions, the percentage depletion allowance and marginal well production, Silverman said.
The decline in production eased under George W. Bush, largely because of the shale boom. The Bush administration, followed by the administrations of Democrat Barack Obama, Republican Donald Trump and Democrat Joe Biden, all saw production rise from unconventional resources despite party affiliation.
Connections and Correlations
For those who believe the oil industry typically fares better under Republican leadership, Silverman shares an interesting fact: Over the last quarter century, with two administrations from each major party, oil prices have generally been higher when a Democrat was in office.
“Here is what affects the industry politically: who is in Congress, who controls the House and the Senate, the states and local governments,” Silverman said. “The oil and gas sector’s long-term trajectory is out of the president’s hands. It’s mostly about supply and demand, and those are global factors.”
As a member of the Petroleum History Institute in Oil City, Penn. and the Denver-based Geological Study Group, Silverman has presented his findings only to be countered with two common questions: “Doesn’t it take time for policies to affect prices? Could the previous administration be responsible for the benefits or fallout of the current administration?”
Recent evidence suggests the answer to such questions is “a little, maybe, but not much,” Silverman said.
In regard to crude oil production levels, the industry struggled under George H. W. Bush, an oil executive, even though he was preceded by another Republican president, Ronald Reagan.
Furthermore, production levels fell under Democratic President Bill Clinton, despite his Republican predecessor, George H.W. Bush.
However, an exception is found in the Obama administration, which was preceded by a Republican president, George W. Bush, when the oil industry boomed. Obama, who once called to “end the tyranny of oil,” as reported by the Columbus Dispatch in July 2008, saw the industry prosper like never before during the shale revolution. However, Silverman reminded that George P. Mitchell, the oilman known for combining hydraulic fracturing with horizontal drilling in the Barnett Shale, should receive the credit over George W. Bush or Obama.
In terms of industry profits, the five largest American oil and gas companies earned more than $250 billion from 2021 to 2023, during the Biden administration, as reported by S&P Global. This is a 160-percent increase in profits compared to the same timeframe during the Trump administration, Silverman noted, referring to a June 2024 CNN report.
“The industry did better under Biden (to publication date) than Trump because of oil prices,” Silverman said, noting the average benchmark West Texas Intermediate crude oil price was less than $60 a barrel during Trump’s first three years in office, compared to more than $80 per barrel during Biden’s first three years.
Wrapping up his research, Silverman takes an example from geophysics to make the point that “prices are signal” and “politics is noise.”
“Signal is the meaningful information. Noise includes the undesirable, irregular fluctuations that obscure the signal,” he said. “The successes and struggles of the petroleum industry, by a wide variety of measures, are most closely related to the signals that are crude oil and natural gas prices. Politics is the noise that interferes with the signal.”