EY: Political Uncertainty Worrying to Energy Market

Despite having gotten through the recent budget-driven government shutdown that temporarily froze the issuing of new drilling permits on public lands, the U.S. energy industry may not be out of the political woods yet, according to a quarterly outlook from global financial services company Ernst & Young LLP (EY).

Part of the reason, according to the report, is that while business optimism abounds, the political acrimony responsible for the shutdown is continuing. Over time, that could affect the oil and gas sector, EY says.

“This could have significant implications not only for the U.S. economy, but also for global energy demand and equity markets as others look to see how the U.S. government resolves the budget issues,” said Marcela Donadio, EY Americas oil and gas leader, in a statement.

To be sure, there was more than a government shutdown to impact markets in 3Q, EY’s report noted. The strife in war-torn Syria, where chemical weapons were allegedly used by Syrians on their countrymen, played a role, as did instability in Iraq, Libya, Egypt and Yemen. Finally, the 16-day shutdown of the government meant that the Energy Information Administration (EIA) did not publish its weekly inventory report.

Those factors resulted in an increase of $5-10 per barrel in the average price of oil in the third quarter, EY said.

While there has been a lessening of geopolitical tensions, the domestic uncertainty remains, and is seen by some as ramping up early in 2014, if not earlier. Maryland Rep. Chris Van Hollen, a House Budget Committee Democrat, told CNN that the odds of a budget deal coming out of the panel were at “50-50.”

House Speaker John Boehner, a Republican, was no more optimistic than Van Hollen.

“The jury is still out,” Boehner told CNN.


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