Energy Sector- Under Trump

Sector Analysis: Market Shifts and Policy Impacts

The results are in. The 2024 U.S Election has been called by the Associated Press. With many investors left wondering, as to what effects this election will have on the energy sector and commodity pricing. Given, Trump's forecasted regulatory and policy changes, which are expected to influence global oil supply.

Today's Reaction:

Commodity Settlement Price

Commodity:	Settlement	Change	% Change
Brent Crude:	71.90	-0.09	(-0.13%)
WTI Crude:	75.19	-0.34	(-0.45%)
Natural Gas:	2.72	+0.05	+1.87%

Energy Stocks at close:

Stock/ Ticker	Price	Change	% Change
Chevron (CVX)	157.72	+4.31	+2.81%
Exxon Mobil Corporation (XOM)	121.00	+2.01	+1.71%
ConocoPhillips (COP)	113.63	+4.42	+4.05%

Today's Sector Analysis:

Per Yahoo Finance:

	Return
Energy Sector	+3.55
S&P 500	+2.53%

This rally in energy related stocks, shows overall optimism for energy and oil sectors under a Trump administration.

Trump administration's Expected Oil / Energy Policies and Analysis

The question? Will Trump administration's policies influence a rise or fall of global oil supplies? With such change, how will forecasted demand adjust, in turn effecting the commodities overall pricing? The answer? It varies across short and long term time horizons.

Per the U.S Energy Information Administration, in 2023 under the Biden administration, the United States produced the most oil of any country ever. The amount hovering at 13 million b/d, outpacing both Russia (10M) and Saudi Arabia (9.7 m). Trump has vowed to tighten and re-enact previous sanctions on both Iranian and Venezuelan oil producers as well as foreign consumers. This previous decision stemmed from politically charged events such as the collapse of the Iran Nuclear Deal and Iranian civil rights abuses. In Venezuela, sanctions on Petróleos de Venezuela, were brought forth to economically combat the oppressive regime of Nicolás Maduro’s government. Therefore, it is reasonable to expect similar actions to the 2018 and 2019 Venezuelan and Iranian sanctions in Trump's 2024-2028 term. Where as in each country's case the previous political climate has worsened. Such sanctions were removed under Biden's presidency, before being partially reinstated; however, in the immediate aftermath of Trump issuing tighter sanctions one can expect a depletion in global crude oil supply. Such will impact a number of U.S. energy based oil companies such as Chevron and Exxon, with higher crude oil prices reflecting positively on balance sheets. However, such sanctions will deter Chevrons potentially ongoing operations in Venezuela and contribute to general greater volatility in the commodity's pricing.

In the long term, the Trump administration has vowed to promote domestic oil production, therefore one can be likely expect policies similar to Trump's 2016 -2020 term to be enacted.

During his first term in office, prior approvals were enacted to expand U.S off shore drilling, as well as open drilling into the Artic National Wildlife Refugee in Alaska. Additionally Trumps approval of the Keystone Oil Pipeline and Dakota Access Pipeline were among actions which were met with heavy criticism and opposition from climate activists. In turn, the Keystone Oil Pipeline and Dakota Access Pipeline have improved overall oil capacity and transportation cost efficiency for the U.S through better access to Canadian reserves. The Trump administration had also previously loosened restrictions and expanded opportunities for the leasing of federally owned land for drilling. In certain instances, the overall royalty rate owed to the federal government had been explicitly decreased. Though, in current royalty agreements, oil companies may not invest in such CapEx, for a mere $52 per barrel after a 25% government royalty. Trump also previously promoted the simplifying of natural gas transportation, by approving additional LNG terminals.

Renewable Energy

While the Trump administration will most likely make strides in the upcoming promotion of domestic oil production deregulation, his administration has also previously divested from a number of pro-environmental regulations. Those of which, chiefly focus on the long term solution of the replacement of fossil fuels, for that of renewable energy sources. Such action can be seen in his previous withdraw from the Paris Climate agreement, where his administration argued it's unfair economic burden and regulation of the U.S oil sector. The Office of Loan Programs within the Department of Energy, was also threatened under Trump's first term in office. This program, invests and injects capital into groundbreaking emissions cutting initiatives. Where as, opposing views have noted, such actions may limit the U.S 's renewable energy technological advantage over other countries and furthermore hinder the U.S's ability to make strides in overall climate pollution.

Thus, our earlier question becomes conflicted. When asking how will the energy sector be shaped under the Trump administration? One should consider which type of energy they speak of.