Trump’s Energy Agenda 2.0: What it Means for Investors
The 2024 U.S. presidential election could significantly reshape the energy landscape, particularly if Donald Trump reclaims the presidency, according to analysts at Mizuho in a recent note.
Drawing from an in-depth analysis of Trump’s proposed energy policies and his track record, several notable impacts on U.S. energy stocks are anticipated.
Trump’s Energy Platform
Unleashing American Energy
Trump’s 2024 campaign underscores a vigorous boost in domestic energy production. His agenda is centered around removing barriers on oil, natural gas, and coal production, with the objective of lowering energy costs and positioning the U.S. as the preeminent global energy producer.
This policy is expected to favor traditional energy sectors, especially oil and gas, though it may also signal a rollback of regulatory oversight and environmental protections.
Regulatory and Fiscal Changes
The Trump administration plans to slash what it views as “onerous and expensive” federal regulations. This includes relaxing constraints on American energy production and potentially scrapping vehicle efficiency standards, as noted by Mizuho.
Additionally, Trump’s plan includes reducing federal spending, which could result in cuts to subsidies for renewable energy technologies and diminished budgets for regulatory bodies like the Environmental Protection Agency (EPA).
Tax Policies
Trump intends to lower taxes and solidify the provisions of the Tax Cuts and Jobs Act. This includes repealing the Corporate Alternative Minimum Tax, which has impacted U.S. oil and gas companies with net operating losses.
Impact on Different Energy Sectors
Oil and Gas
Trump’s policies are projected to benefit the oil and gas sector through deregulation and increased production. Key players such as Chevron (NYSE), ConocoPhillips (NYSE), and EOG Resources (NYSE) could gain from reduced restrictions and easier offshore project approvals, according to Mizuho. However, the mandate to cut gasoline prices might lead to an expanded OPEC+ oil supply, which could negatively affect oil-focused exploration and production companies like ExxonMobil (NYSE) and Occidental (NYSE) Petroleum.
Midstream and Infrastructure
The drive for heightened domestic energy production and infrastructure growth is likely to benefit midstream companies. Firms involved in the transportation and storage of energy, such as Williams Companies (NYSE) and Targa Resources (NYSE), may experience increased demand and investment.
Renewable Energy
While the Trump administration may decelerate the growth of renewable energy subsidies, certain incentives, such as those for green hydrogen and carbon capture, could be preserved.
However, companies heavily reliant on existing subsidies and climate policies, such as First Solar (NASDAQ) and NextEra Energy (NYSE), might encounter challenges.
On the other hand, lower interest rates and a renewed emphasis on U.S. manufacturing could offer some balance, indirectly supporting renewable stocks through broader economic growth.
Economic and Market Implications
Inflation and Energy Costs
A cornerstone of Trump’s energy policy is reducing energy costs, a measure seen as vital for curbing inflation and spurring economic growth.
Market Performance
Historically, energy stocks underperformed the broader market during Trump’s first term, even when excluding the pandemic-affected year of 2020.
