On the 20th January 2025, Donald Trump will once again enter the Oval Office. He has promised to enact reforms across America’s government, education system, economy and to reset international relations.
As with most presidencies, every sector will feel the impact of a new administration’s priorities, but I feel that I need to particularly look at the impact for the energy industry.
Fundamentally, what we’re told we will see is a shift in priorities. So, what should we expect?
At home
In his previous term, Trump rolled back some environmental regulations and focused on vocally supporting fossil fuels such as coal, oil and natural gas to promote American energy independence through increasing domestic production. This narrative was welcomed by the energy industry and by consumers alike who were aligned on the fact that affordability and availability of energy were their primary concerns and it is now clear that this is still the case.
With a more clear mandate and assuming that those priorities do remain politically relevant after January, which looks like a fairly safe bet, we will see reduced federal support for climate change mitigation initiatives, leaving states and private companies to drive renewable energy efforts without as much government backing and more support for fossil fuel pipeline permits and more meaningful federal land lease auctions. Carbon and methane mandates will most likely be removed or greatly weakened, but we must not underestimate the role of states to set and manage their own targets.
On the coal energy front Trump’s record is not supporting the rhetoric. He rallied strongly in coal country in 2015, but during his first administration coal production declined and continued to shed employees. Strangely, under Biden both production and employment grew in the segment, but I would expect that there will be limited discussion and involvement in the sector therefore its natural and market driven decline will continue.
Natural gas has become the fuel displacing coal in great numbers, both as primary heating and electricity generating fuel. It works great as a base load carrier as well as a switching fuel in renewable-heavy grids. While we did see an increase in investment and in turn in Natural Gas production by nearly 30% during Trump’s first term, the trend did not reverse under Biden and it would be prudent to assume that domestic market factors are the primary driver for natural gas investment levels. However, a few warmer than expected winters have severely damaged the upside price potential of the resource and thus limited the investment potential of the pure play E&Ps. This climate impact has left natural gas with economic potential related to LNG exports in high priced markets such as Europe and Asia and also as fuel to peaker plants that supplement renewable heavy grids.
Most importantly, it is critical to evaluate the potential impact of the 47th administration on the Oil markets. Trump’s pick of Chris Wright as an energy secretary nominee is a wise choice. He is a seasoned industry leader with strong positions on the role of crude oil in the modern economic landscape. Although I do not agree with his assessment that “there is no energy transition”, I do believe similarly to him that the “climate crisis” as presented to the global audience is not the threat to human security and stability that it is being made to be and most of voters concur that their monthly energy bills along with the security and availability of supply are paramount. In a market still dominated by OPEC+ and Saudi Arabia in particular, there is little that can be done to control global prices and therefore investment, but the US does play a crucial role both as the supplier of last resort with our “infinite” production potential and also with the strategic geopolitical role that we play. The role of the US in the global energy and security framework will create a requirement for interaction and collaboration between the secretaries of energy, state and commerce to enforce a different path and it would be interesting to watch what path the administration takes on both, after the nominations are confirmed and all critical players are settled into their new roles.
The pro-fossil fuel narrative has created more uncertainty in the renewable energy market, especially for large-scale solar, wind and battery projects that still rely on federal grants, tax incentives or regulatory support. However the impact on projects already far ahead in their scaling might be somewhat muted and we need not discount the resistance from states and congressional districts that get the benefits of those and yet support Trump this electoral cycle.
Furthermore the role of Elon Musk in this administration and his ability to influence policy might greatly affect the direction of many decisions related to those three technologies, especially considering his deep involvement with Tesla Solar, PowerWall and xAi’s need for cheap and reliable electricity to support the endlessly power-hungry GPU’s.
And abroad
On the international front, Trump famously used his first term to pull the US out of the Paris Climate Agreement. He looks set to do the same again. It was interesting to see that ExxonMobil came out publicly defending the Paris agreement, but Trump’s history with XOM in his past administration will likely not alter his impulse to withdraw and go at it unilaterally.
More widely, it seems likely that his new administration will continue to take a more isolated US stance on climate issues, impacting collaboration with other global partners. China’s climate envoy, Liu Zhenmin, has already said he hopes that cooperation between the world’s two largest economies will be enhanced. On the other hand, the path that China has taken of electrification as a counter to their dependency on imported oil and natural gas relies on heavy investment in Nuclear, Solar and Batteries as load-balancers. I am not sure what the cooperation pathways would be, given the radically different approach to energy security. It remains to be seen how this climate collaboration agenda will be a lever in US-China trade discussions.
The EU, meanwhile, seems lost and rudderless. Despite the new European elections showing a clear rejection of the green policies of yore, Brussels continues to seek to pursue a more renewable energy strategy in the wake of waning global alignment on the issue. This is a treacherous path without any technology or resource levers. China is where the low-cost PV, EV and battery technologies are most advanced, Russia is where the cheap natural gas is needed as the transition fuel in any transition plan and the NIMBY resistance movement has left no room for domestic nuclear energy production nor fossil fuels outside Norway’s oil and gas and Poland’s coal "renaissance". The US-EU relationship will most likely revolve around arms-length deals for LNG, which is a regrettably weak place for the largest global markets.
Conclusion
It is important to note that most industry trends are market driven and will likely continue no matter who sits in the White House. It is also key to understand that the US political system is deeply fragmented and extremely devolved by design and the media portrays an outsized level of influence to the US president in any administration.
Supply of alternative energy sources will continue to rise globally due to the continued growth of energy demand among consumers. Companies and countries across the globe, have set ambitious net-zero goals and will continue to stand behind them, because they believe that it is good business rather than good policy and as long as these targets do not become unachievable mandates that distort the marketplace itself they should be welcomed.
Furthermore, as any technology develops and matures, the costs are likely to fall further and efficiency will make it more competitive thus setting it on equal or better footing with fossil fuels on cost and availability.
As is always a good rule for businesses - don’t pay much attention to the politics of the day. Good business plans are measured on their performance in the decades ahead and not the latest election cycle.
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