Former U.S. President Trump has promised to increase oil and natural gas production, carry out regulatory reforms, and reduce green energy subsidies by the Biden administration since announcing his candidacy for the 2024 presidential election. Now, as he secures a second term as president, market observers are studying his potential impact on the energy sector, from crude oil and natural gas to solar and wind power.
On October 18, Trump said during an event in Detroit, “We will drill, drill, drill, baby, drill.”
Over the past week, U.S. crude oil and natural gas prices have been fluctuating.
Using the closing price on election day, November 5, the trading price of West Texas Intermediate (WTI) crude oil per barrel on the New York Mercantile Exchange was around $72. Nearly a week later, oil prices have fallen below $69.
Natural gas prices have also been volatile, with strong rebounds at the beginning of this week, seeing a significant 9% increase in trading prices on November 11.
Energy strategist Phil Flynn from The PRICE Futures Group stated that the recent “drill, baby, drill” mentality has contributed to this mixed performance in the market.
Flynn told The Epoch Times, “The U.S. oil and gas industry can break free from oppressive regulatory laws, starting to produce oil based on supply and demand expectations rather than trying to guess what the next law will be and make decisions based on it.”
In 2018, the U.S. became a net oil exporter for the first time in 75 years, with crude oil production reaching a historic high of over 13.1 million barrels per day in March 2020. In the years following the pandemic, weekly crude oil production struggled to rebound. It wasn’t until October 2023 that U.S. production climbed back above pre-pandemic levels, reaching a new daily high of 13.5 million barrels last month.
Estimates on how much additional oil and natural gas would be produced vary across the industry.
Flynn estimates that U.S. production could increase by 1 to 2 million barrels per day over the next few years.
Rob Thummel, Senior Portfolio Manager at Tortoise Capital Advisors, mentioned in an email to The Epoch Times that the U.S. “will keep its role as U.S. oil production is forecasted to grow by approximately 300,000-500,000 barrels per day.” Additionally, he predicts that by 2030, natural gas production could increase by around 30 billion cubic feet per day.
“We believe that economics, not politics, will prevail. U.S. oil and gas producers will seek to maintain capital discipline and ensure global oil and gas markets remain balanced to avoid oversupply,” Thummel added.
Experts say regulatory uncertainty has long been a major concern for the oil and gas industry. For example, in April, the Biden administration approved a regulation that significantly raised the minimum oil and gas lease guarantee payments drilling companies must pay from $10,000 to $150,000. This announcement significantly increased the cost for fossil fuel companies to extract oil, gas, and coal from federal lands.
Last year, President Biden temporarily halted the approval of U.S. liquefied natural gas exports, a decision that was overturned by a federal judge in July this year. Thummel mentioned that the incoming Trump administration “will immediately resume DOE reviews of LNG projects.”
Trump and his team have pledged to take action within the Interior Department and other environmental agencies to abolish energy and environmental regulations. In fact, promoting fossil fuel production activities on federal land and waters has been a core aspect of Trump’s energy policy proposals.
Trump’s campaign team stated, “President Trump will release vast quantities of liquid gold from U.S. public lands for energy development.”
Warren Patterson, Head of Commodity Strategy at ING, mentioned that growth prospects could come from oil production on federal lands, effectively reversing the Biden administration’s energy policies.
The Biden administration reduced lease sales on federal lands and increased bonding and royalty payments for production on federal lands.
Patterson stated, “If we compare the number of leases issued in the first three years of Trump’s tenure, there were over 4,000 in total. In the first three years of Biden’s presidency, just over 1,400 leases were issued. However, so far, the lower number of lease issuances has had little impact on production. Since Biden took office, oil production on federal lands has been on an upward trend every year.”
Although the Trump administration is expected to adopt more industry-friendly policies that could accelerate production, market experts suggest that prices will be the true driving force behind production levels in the coming years.
According to surveys conducted by the Dallas and Kansas City Federal Reserve Banks to producers, oil prices need to be around $64 per barrel to ensure profitable drilling.
Adam Ferrari, CEO of Phoenix Capital Group, a company specializing in oil and gas mineral rights acquisitions, stated that there are two ways to check the industry’s breakeven level. The first involves calculating the cost per barrel of oil that companies have drilled, and the second involves vertical well oil production.
He explained, “I think most people believe the cost of extracting one barrel of oil from underground ranges from $15 to $60.” Ferrari said his company can profitably extract Bakken oil from underground at $20 per barrel, “possibly even lower.”
“My opinion is that $55 is a very good number,” he added.
Looking ahead to 2025, analysts at JPMorgan predict that oil prices next year could average around $75 per barrel and drop to $60 by the end of the year.
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration forecasts an average oil price of $78 in 2025.
Ferrari stated, “He (Trump) is a smart guy, I think sometimes he speaks in simple terms, but he knows we need a price point of $55 to $60 or $65 to justify drilling for more oil in the U.S. He doesn’t want to weaken our industry.”
Following the election results, a significant drop in renewable energy stocks was observed, from a 14% decline in First Solar’s stock price to an 18% drop in Sunrun’s stock price.
Expectations of Trump potentially canceling or reducing various government subsidies in the Inflation Reduction Act have been increasing, fueling the sell-off of new energy stocks.
According to the U.S. Energy Information Administration’s projections, domestic renewable energy expansion from 2024 to 2030 is set to double due to the stimulus provided by generous provisions in the Inflation Reduction Act.
Dan Lashof, U.S. Director of the World Resources Institute, stated that Trump’s second term will hinder, but not completely halt, the clean energy transition. In a statement following the election, Lashof said, “A return by Donald Trump to the White House will not sound the death knell for the rapid acceleration of the clean energy transformation that has occurred over the past four years. If President Trump now tries to rescind clean energy incentives, he will face opposition from both parties.”
House Speaker Mike Johnson expressed that although uncertainties exist regarding the future of the renewable energy industry in Trump’s second term, addressing the mass subsidies with a “scalpel” rather than a “sledgehammer” to deal with the subsidies may be more practical.
In September, Johnson acknowledged that “blowing up” most of Biden’s signed climate change legislation is almost impossible.
During a CNBC interview in September, he said, “You have to use a scalpel, not a sledgehammer because some of the provisions are beneficial to the overall.”
Eighteen Republican lawmakers penned a letter to Johnson in August, urging GOP leadership to retain some provisions in the legislation.
In their letter, the Republicans stated, “Prematurely abolishing energy tax credits, particularly those used to demonstrate investment tax credits already in the ground, will disrupt private investment and halt ongoing developments.” “Completely abolishing energy tax credits would cause the worst-case scenario; we would spend billions of taxpayer dollars but almost get no return.”
Despite Trump’s opposition to green energy, Adam Ennamli, Chief Risk Officer at the General Bank of Canada, does not believe that the Trump era “will mean the end of the renewable energy industry.”
Ennamli remarked, “This industry is already very mature, and it is now primarily driven by economic factors rather than federal policies. While the Trump administration may repeal certain regulations and subsidies, the fundamental market forces favorable to renewable energy are strong.”
Moreover, Ennamli pointed out that the renewable energy industry has prepared for various political outcomes, including focusing on state-level markets, expanding new private financing structures, utilizing storage solutions, and diversifying the supply chain.
He added, “Although Trump’s second term may present challenges to the renewable energy industry due to regulatory rollbacks and reduced federal support, this is unlikely to hinder its growth, resilience, or value proposition. The maturity of the industry, driven by economic fundamentals and national initiatives, enables it to adapt and thrive well even amid political changes.”
With two months remaining, speculation suggests that the White House may allocate remaining funds from the Inflation Reduction Act before inauguration day.
Trump has vowed to cancel all unused funds in the Inflation Reduction Act. However, even though Trump may seek to cancel many tax breaks, subsidies, and other grants in several acts, most of the funds have already been deployed.
So far, the Biden administration has provided $90 billion in subsidies to climate and clean energy projects, accounting for three-fourths of the aid in the legislation.
In response, Neil Winward, CEO of Dakota Ridge Capital, believes that triggering a congressional review is more likely.
Under the Congressional Review Act, Congress has the authority to review and potentially overturn new final federal regulations implemented by government agencies and entities.
Winward told The Epoch Times, “I think one of the things the incoming government is capable of doing is freezing regulations for a period of time.” “They have 60 days to completely repeal the entire regulation, which is a very blunt instrument.”
Experts believe that the more likely scenario is that the incoming government will adopt all the above energy policies, accept multiple fuel sources to lower prices, and ensure U.S. dominance in the global economy.
Winward expressed, “The Trump administration must advance all of these energy forms because only an energy miracle can truly solve the economic problems and debt burden we face.”
According to the U.S. Energy Information Administration’s forecasts, electricity demand in 2024 and 2025 will reach record highs, indicating that the U.S. may need to utilize various energy sources.