The U.S. electoral college and popular votes have been decisively won and the stock market reflected approval by rallying to new highs. “Drill, baby, drill” is just one of the promises President-Elect Donald Trump has vowed to keep after taking office again in 2025. With the new president elected, we can now explore other areas where keeping promises is likely to shape the industry and price of oil for years to come.
Oil and gas companies are much more likely to benefit from the political winds of change than a continuation of the status quo under a Harris administration. And meanwhile, where skies have cleared for oil and gas, a big storm of uncertainty looms over renewable energy and carbon markets. Here are the key areas where a second Trump presidency are likely to impact the energy industry:
- Energy Independence: Myth or Attainable?
- Accelerating U.S. Natural Gas: Import or Export?
- Crude Oil Price: Bullish or Bearish?
- Climate Action: Energy Diversification or Back to Carbon?
But what if Vice President Harris had won? Be sure to read our pre-election implications of a Trump or Harris win blog.
Looking for more content to get ahead of the market? Prepare yourself with key energy insights and the latest energy trends for the new year. The highly anticipated 2025 Energy Trends E-Book, slated for release in early January 2025, has the energy community buzzing.
The Myth of U.S. Energy Independence
The combined might of oil output across U.S. basins, with the Permian alone expected to produce nearly 14 million barrels per day in 2025, the U.S. is indeed more than capable of meeting its own demand for oil, in theory that is. Ironically, the U.S. remains both an exporter of crude oil and an importer because it is more cost effective to import oil in some parts of the country and because refining facilities designed to handle heavy crude oil from other countries aren’t compatible with the light, sweet stuff flowing from the Permian.
When calling on the industry to drill and frac more, President-Elect Trump points to places like Alaska’s Arctic National Wildlife Refuge. Oil weight and sweetness notwithstanding, the remoteness of such reserves makes it much less attractive to produce and transport and, even then, it’s just a drop in the bucket, so it isn’t a question of opening up federal lands to drilling.
Will Trump tariffs undermine the industry when it comes to importing the large balance of oil that is compatible with U.S. refining? Canadian crude oil imports are essential to satisfying U.S. appetite. Mexico as well, but to a lesser degree. At least in these cases, tariffs seem less likely given the role of exports from north and south of the border in U.S. energy security.
But tariffs have been promised. As with his previous term in office, President-Elect Trump is likely to use tariffs as targeted trade action to tilt the advantage towards U.S. interests versus a blanket policy.
Accelerating the Future of U.S. Natural Gas
The Biden administration was focused on reducing environmental impact, resulting in decisions to scale back the domestic natural gas supply chain by delaying infrastructure projects and introducing additional methane fees.
“The biggest impact is likely to come from easing regulatory burdens on infrastructure with the federal government potentially stepping in to encourage more permitting of interstate pipelines plus ending the permitting pause on LNG export facilities.” – Andrew Dittmar for CNBC
Despite headwinds at the federal level, progress has been made in liberating a portion of stranded Permian gas with pipelines like the Matterhorn Express transporting 2.5 Bcf per day to LNG trains on the Gulf Coast. Proposed pipelines and projects awaiting permits are now poised to move forward much faster. Perhaps even the previously cancelled Keystone XL crude oil pipeline will see new life, which would be a double victory for Canada assuming President-Elect Trump waives tariffs for one of the country’s most important business partners.
President-Elect Trump could potentially also lift the current ban on LNG exports to big markets in Asia and Europe because they are not on a list of countries with whom the U.S. has free trade agreements which would further accelerate the future of U.S. natural gas and firmly establishing it has a top exporter. Combined with the strategically placed reserves of the Haynesville Shale and growing pipelines from the Permian, there is building upside for natural gas in the coming years.
Unlike many permitting problems and export bans that can be solved with executive orders, the waste emission charge (otherwise known as the methane fee) is enshrined in laws passed with the Inflation Reduction Act (IRAJust this year, updates by the EPA to how emissions are calculated effectively doubled the liability for many oil and gas companies with a recent decision by the U.S. Supreme Court allowing the EPA to continue collecting fees, which start in 2025 based on reporting for 2024 at $900 per metric ton then escalate to $1,500 in 2026.
Crude Oil Price Expectations
While there may be some short-term downward price pressure on Brent following the U.S. presidential and congressional elections, the Enverus price forecast remains bullish at $85 (low $80s for WTI) compared to the consensus of $75.
Based on his prior track record in office and statements on the campaign trail, President-Elect Trump is likely to return the country to a more isolationist stance, placing domestic policies like economy and immigration ahead of geopolitical interests. His stated goals to disengage from the Ukraine war and the Middle East will also inject uncertainty about U.S. involvement in global energy disputes, removing the stabilizing forces of U.S. foreign policy and military might, which could add upward pressure on prices.
Further supporting the $85 Brent base case is the current state of global oil stockpiles. Levels are low across countries in the Organization for Economic Cooperation and Development, including the U.S. Strategic Petroleum Reserve. About half empty or half full depending on the level of optimism, both the Biden and previous Trump administrations failed to replenish such an important influence on supply and price.
Historically, crude oil prices end up lower within six months of major SPR draw down, however, the traditional supply shock absorber, Saudi Arabia, could be a wildcard given the deepening conflict in the Middle East. With Qatar now ending its mediation role out of frustration with both sides in the conflict and the U.S. uncovering an alleged assassination plot on President-Elect Trump by Iran, the situation continues to deteriorate, casting even more uncertainty on Middle East exports in 2025. That being said, OECD stockpiles are currently about what they were last year when Enverus forecasted $90 Brent.
Learn more about Why IEA’s Oil Demand Net Zero Ambitions Are Wishful Thinking
Implications for Renewable Energy and Carbon Markets
With a little more than two months before the presidential inauguration, the executive orders to withdraw the U.S. from the Paris agreement on climate change are already written up and awaiting signature. This decision will alter the U.S. government’s commitments to reduce greenhouse gas emissions, setting the country on a climate action course that isn’t likely to change.
“The election outcome will significantly shape the renewable energy sector versus traditional energy, with each candidate’s policies offering distinct pathways for the future of the energy landscape” – Andrew Gillick
Since the end of President-Elect Trump’s first term, the energy industry has undergone an ESG transformation and made bold strides on the energy transition path. Not only are new federal laws in place, but a continued commitment to reduce emissions in the face of undeniable climate change is what Wall Street expects.
A more nuanced view of how to achieve lower energy prices will hopefully lead the new administration to recognize the vital importance of solar and wind power generation to a diversified energy mix. After all, with skyrocketing electricity prices and natural gas prices only expected to go higher, producing only fossil fuels isn’t a complete solution. As well, the rise of data centers is driving a rapid increase in energy demand. Learn more about how nuclear could play a role in the energy mix.
Data center demands have increased dramatically, placing a heavy burden on the Lower 48’s already delicate power infrastructure. Learn how the energy landscape must adapt.
But what about the IRA’s investor tax credits? Absent a repeal of the IRA, the new Trump administration could take steps to block certain aspects of its implementation, effectively stalling projects piecemeal.
Over the next four years, the power grid is also likely to benefit from improved permitting, enabling much needed transmission to be built to move an increasing mix of natural gas power generation and renewable energy. And this balance of traditional and renewable energy is perhaps the best analogy for where we find ourselves heading into a second Trump term where a willingness to balance contrasting ideologies will be key to success.
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