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Why The U.S. Election Results May Have Less Effect Than You Think

There is an enormous sense of relief in the U.S. at the moment. Not necessarily because the Republican Party won the mid-term elections, but just because they are over and the barrage of vacuous and negative advertising is finally over. Still, as the President memorably once said, elections have consequences. Most energy investors probably see the result as a good one for their portfolio, regardless of their political leanings, and, so far, that looks to be the case. The energy sector ETF, XLE, rose over 1 percent on the news and is holding onto gains. Some Republicans are already making noises about a “more relaxed” policy towards oil and other fossil fuels and many are predicting that that will be one of the first areas the new Congress addresses. Investors, however, should not get carried away.

It is likely that Republicans in both the House and the now Republican controlled Senate will introduce bills aimed at approving the Keystone XL and other pipeline projects, and at expanding drilling permission in the U.S., including on Federal land. That is all well and good, but, apart from in certain sectors of the oil and gas industry, the effect is likely to be limited.

First, any such legislation will have to get past the President’s veto. It is possible that Barak Obama will wish to soften the image of intransigence that many feel will be his legacy and sign such legislation, but is equally possible that, with nothing to lose personally, he will…




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