New tax law will help US energy sector

Subject

Oil drilling in Alaska and the energy sector under the new US tax laws.

Significance

Speaking to reporters on January 16, Senator Lisa Murkowski (Republican, Alaska), said that she wants to seek a new bill that would promote further environmental protections in what is known as the 1002 Area. The 1002 Area is in Alaska’s Arctic National Wildlife Refuge (ANWR) and was opened for oil and gas exploration and drilling when President Donald Trump signed into law the Republicans’ tax reform bill on December 22 last year.

Impacts

• Shareholders in refiners could see strong returns as the tax cut windfall is funnelled into higher dividends and share buybacks.
• If the tax cuts spur stronger short-term economic growth, US oil demand should accelerate, a bullish indicator for oil prices.
• If the tax cuts increase the US budget deficit, subsidies for the energy sector could be revisited.