You could almost hear the champagne corks popping all over Houston in the small hours of Wednesday morning.
The US election has handed a significant reprieve to Big Oil, as Republican control of the Senate is likely to insert a hefty spanner in Joe Biden’s plans for a radical “green” revolution.
It seems unlikely that the Democrats will win a clean sweep – the presidency, the House and the Senate. If this had happened, as many predicted, nothing would have been able to stand in the way of Biden’s radical US energy revolution, where an American government would actually turn its back on the oil industry.
However, as results trickled in from Alabama to Wyoming, Biden’s ambitious green agenda was looking less of a threat.
Republicans will probably keep their Senate majority – where they will stop the most radical parts of the Democrats’ eco-agenda ever seeing the light of day. There will be relentless partisan wrangling ahead.
Two mega-themes that will dominate investors’ asset allocation decisions over the next few years are the digital and green revolutions. The first of these is now unstoppable, the second has hit what could be seen as a significant bump in the road.
The Covid-19 crisis accelerated technological uptake by formerly tech-resistant people.
The retired who were stuck in isolation were forced to understand and use digital services such as Zoom and Amazon. This resulted in the addressable market for digital services increasing significantly – the market is now much bigger.
But the US green revolution has now hit a slow-moving traffic jam on Pennsylvania Avenue. At the time of writing, the Republicans are near-certain to retain the Senate. This will result in a divided government that will often hamstring President Biden’s agenda.
The degree to which a president has control of Congress often determines their political might.
For any radical agenda involving major changes to the law and to ordinary American lives, a divided government will make progress much more difficult – and achievements fewer.
Biden committed $2 trillion (£1.5 trillion) to be spent over the next four years to turbocharge climate policy as part of his campaign pledges.
He argued that this would drag the economy out of the pandemic-induced doldrums at the same time as future-proofing US economic infrastructure. None of this is now a certainty.
For US energy policy, a shift away from carbon is a significant moment and major milestone in the history of a country that was arguably built on a foundation of oil. But, of course, the oil industry will not take this attack on its existence lying down.
With Republicans directing power in the Senate, Washington’s oil lobbyists have some real allies to watch out for their backs and ensure a green revolution becomes more of a green evolution.
During campaigning, Biden argued that directing investment in the economic recovery towards green endeavours will tackle the US’s second-rate and crumbling infrastructure, making it fit for the economy of tomorrow – creating jobs in the process.
The long-standing Republican mantra “drill baby, drill” highlights the close links between the Grand Old Party and America’s oil men. Donald Trump’s re-election campaign’s fundraising efforts brought in at least $1.9m from donors in the oil and gas industry until the end of August this year, two months before the end of campaigning.
That is according to the Center for Responsive Politics’ analysis which looked at Federal Election Commission data on donations.
In the 2016 election, the Trump campaign received $1.2m from the industry in the entire electoral cycle. The oil men of Texas and the Gulf states will therefore be relatively pleased with the outcome, if confirmed. Preventing a Democrat clean sweep will mean the move away from coal, oil and gas comes at a more pedestrian pace.
Nevertheless, there is still going to be a permanent shift away from carbon-intensive fuel into wind, solar, geothermal, hydrogen and other new technologies that will improve the air we breathe.
The rest of the world’s major economies are accelerating their plans to achieve this, but the overall rate of progress will be tempered by the US political fight.
The European Union’s Green Deal grandly claims it will transform the bloc from its current status as a high-carbon economy into a leader of a cleaner future. It aims to use some EU money earmarked for job creation to encourage a sustainable, green shift.
But the administrative super-tanker that is the EU will take time to allocate and spend this money – and there will be arguments aplenty in the process.
China has also recently introduced a net zero carbon target – and the UK has had one for some time.
The green revolution is certainly happening, but this American election has had an impact on the rate of change.
The result is likely to reduce demands to implement the radical new agenda from some Democrats, as their mandate is clearly lower than the party hierarchy hoped. It will embolden Republicans from the oil-rich states to use the Senate to block and filibuster – and is a cast-iron guarantee of partisan gridlock in many, if not most, issues on Capitol Hill.
Advocates of the green agenda will be disappointed – but this is likely to be one of the best possible outcomes for markets.
Shares in oil companies rose as it became clear any policy changes will now be slow and probably watered down. There has also been a lot of politics driving markets over the last few years, so the inability of politicians to act in a radical manner has been taken as a positive.
The US political gridlock may provide almost as much relief for general investors everywhere as it does for the fancy boot-wearing oil barons on the far side of the Atlantic.
Garry White is chief investment commentator at wealth management company Charles Stanley