Republican Donald Trump's election victory has profound implications for the energy sector in the United States and globally. Since his first term, Trump has been known for his strong support for the fossil fuel industry and skepticism towards international climate policies.
His energy policy will likely focus on promoting domestic production of fossil fuels, reversing environmental regulations, and redefining relationships with other global energy producers.
Among the most significant aspects will probably be the revival of Trump's «America First» energy policy. This could lead to greater exploitation of national energy resources, including oil, natural gas, and coal. It is expected that Trump will relax even further the environmental and energy regulations imposed during Biden's administration, which could boost domestic energy production.
One of the main consequences will be a significant boost to the U.S. oil and gas industry. It is expected that Trump will relax restrictions on drilling on federal lands and accelerate permits for new energy infrastructure projects. This could lead to an increase in domestic oil and natural gas production, potentially impacting global prices and the United States' competitive position as an energy exporter.
Regarding renewable energies, it is likely that they will see a decrease in government support and tax incentives. Trump has been critical of policies favoring clean energy, which could negatively affect the growth of this sector in the short term.
However, it's worth noting that the energy market has evolved significantly since Trump's last term. Investment in renewable energies has increased substantially, and many major corporations have publicly committed to transitioning towards a low-carbon economy. Therefore, the actual impact of Trump's policies may be mitigated by market trends and business decisions.
Now, let's review each sector in more detail.
Drill, drill, drill and deregulate
This policy will reduce drilling and exploration costs, as annoying regulations will end, and open more surface for drilling. This will increase oil supply without increasing demand, so let's draw conclusions about where the price would go. Additionally, if Trump stops supporting Ukraine and forges an agreement with Russia, that would remove Russian oil from the sanctions list. This would mean more supply in the market. The biggest winners, the drilling companies.
Natural Gas
With a more optimistic outlook, Republicans will limit investigations into methane leaks and prevent states from restricting domestic use of natural gas. They might even approve LNG exports.
Republican hostility to renewables could even increase sales of natural gas to public utility companies. But the big increase to consider is in sales to power plants. It's opportune to remember that this industry has always wanted to switch from coal-fired power plants to gas ones.
Now, the incoming administration would give them permission to do so. Also, pay close attention to the slow disappearance of commitments to «net-zero emissions by 2050».
On the negative side, climate warming will reduce gas sales for winter heating. And a Russian deal over Ukraine could reopen global markets to Russian gas, depressing the U.S. LNG market.
Electricity
The outlook may be somewhat negative in this sector, possible losses of subsidies. But worse, Trump has expressed his aversion to electric vehicles, although his closeness to Elon Musk might make him reconsider.
Electric vehicles offer the greatest potential for sales that the electricity industry has seen in decades (greater than data centers). In exchange, there will be relief in the application of anti-pollution laws and coal burning will be encouraged. With this scenario, it seems that increasing electrification will be obtained, but without decarbonization, an option that was really not considered probable.
Short-term outlook for renewable energies
During his first term, Trump showed clear skepticism towards policies favoring clean energy, and he is expected to resume this stance in his new government. It is likely that we will see a reduction or elimination of tax incentives and government subsidies that have been crucial for driving growth in the solar and wind markets in the country. We could witness almost a crusade against environmentalists.
Eliminate subsidies. Cut investment in research (let the Chinese keep doing it). Many major corporations have publicly committed to transitioning towards a low-carbon economy, regardless of federal policies. Therefore, although Trump's policies may represent a temporary obstacle, it is possible that the momentum towards renewable energies will continue, especially if states and cities maintain their own climate and clean energy initiatives.
Nuclear Energy
If Republicans remain firm in their stance, construction of new nuclear plants in the United States should be seriously limited. For two reasons. Firstly, if CO2 emissions are now irrelevant when evaluating new plants, gas and coal are much cheaper to build. Secondly, many of the proposed small modular reactors (SMRs) have foreign components that would be harmed by high import tariffs that the incoming administration will probably impose.
However, Trump might relax some of the stricter regulations affecting existing nuclear plants, allowing easier extension of their operating licenses.
Additionally, there might be greater emphasis on research and development of advanced nuclear technologies, which could improve safety and efficiency of nuclear energy production. It's important to note that expansion of nuclear energy in the U.S. faces significant challenges, including high construction costs, concerns over waste management, and divided public opinion.
Geopolitics
In the geopolitical arena, Trump's return could lead to renewed tensions with oil producers like Saudi Arabia and Iran, which could affect oil price stability. Additionally, his stance towards Russia could influence dynamics in the global natural gas market, particularly in Europe. It's worth noting that Trump's energy policy will face significant legal and regulatory hurdles, especially if Congress is not controlled by Republicans. This could limit the scope of some of his most controversial energy proposals.
In conclusion, Trump's victory will mark a significant change in the direction of U.S. energy policy, with renewed emphasis on fossil fuels and a more skeptical stance towards international climate policies.
However, the complexity of the global energy market and current economic trends suggest that the impact of these policies may be more nuanced than initially expected.
