Trump 2.0: Implications for U.S. Energy & Related Infrastructure
- SWS
- Jan 24
- 10 min read
Energy Policy Perspectives Vol. 1 - January 24, 2025
Executive Orders are Vague With Uncertain Timing and Results
This week, we begin a continuing series of energy sector infrastructure commentary as the new Trump administration takes shape and critical U.S. energy infrastructure policy continues to rapidly evolve.
Eight orders: Thus far, President Trump has issued eight executive orders that could directly affect the outlook for U.S. energy policy, energy production, energy use, and the prospective outlook for broad U.S. energy and related infrastructure. The orders also rescinded prior executive orders of President Biden that reverse various directives related to energy policy and the general implementation of the Inflation Reduction Act of 2022 (IRA) and the Infrastructure Investment and Jobs Act (IIJA). See the full slate of orders at: https://www.whitehouse.gov/presidential-actions/. Please watch for further Energy Policy Perspectives to come.
Somewhat clear policy, uncertain details & timing: Most of the following executive orders specify areas of U.S. energy policy that the Trump administration hopes to expedite and promote. The orders also dictate an evaluation of current government policies, programs, laws, rules, and regulations. For many, the period of evaluation is open-ended and uncertain. The orders are short on precise actions pending the various specified reviews. It also remains to be seen which details of the orders are intended to be pursued explicitly and which might be posed simply for pandering effect. Therefore, the final effects of the executive orders remain opaque, in our opinion. However, the executive orders clearly favor fossil fuel production and use, ICE vehicles, LNG exports, and enhanced electricity infrastructure development, including new nuclear generation and uranium mining and processing resources.
Potential benefits for many industries/companies: While the orders represent a significant change in Federal energy policy, considerable market inertia for clean energy infrastructure remains and is unlikely to reverse under the new administration, in our view. Also, while the executive orders seek to reduce the friction of Federal regulation in order to expedite the execution of energy infrastructure projects, state, local, economic, and legal impediments to project development could actually be exacerbated as a result. Overall, we see the orders as broadly constructive for energy production and infrastructure industries, like utilities, E&P companies (particularly the natural gas weighted names), and the emerging nuclear SMR industry, favorable for construction materials and infrastructure constructors, and moderately negative for the clean energy infrastructure and EV industries thus far. Unsurprisingly, the new energy policies are also constructive for the AI and big tech industries given the policy directives clearly favoring new dispatchable electricity generation infrastructure for data centers/AI computing.
Natural gas is one of the greatest beneficiaries: Under the Trump administration, natural gas is perhaps the greatest beneficiary from increased demand looming from AI/Power generation, LNG, and as it is the fuel that would fill any shortfall from potentially slower renewable growth due to the executive orders revising prior green energy programs. Specifically, under a Trump administration, LNG infrastructure projects are likely to be fast-tracked with less burdensome regulations for permitting and construction. Further, natural gas is the current fuel option that is expected to support the near-term strong AI growth projections going forward. President Trump seemingly favors AI with his support for the Stargate AI JV announced by OpenA, Oracle, and SoftBank earlier this week. The plans for the expansion of AI infrastructure from the tech industry will lead to significant additional data center capacity which will largely be incrementally powered by significant new natural gas fueled electricity generation capacity over the near-term. Despite this positive backdrop, which is supporting higher natural gas prices, we expect gassy E&Ps to approach 2025 cautiously with maintenance type programs. However, we see room for an inflection to production growth in 2026+ to meet the increased demand for natural gas. While a great deal of optimism is in the natural gas equities, the strong narrative is likely to continue re-rating equities as generalist and tech investors continue to support the group.
Nuclear & electric infrastructure in general are also big beneficiaries: The Trump administration’s orders, presumably with the assistance of the AI developers, provided a significant new policy support in place this week for new nuclear generation. Clearly, the new energy policy understands the demand for dispatchable power over the longer-term. The details of how the Trump administration will technically support the completion of new nuclear technology development remain to be seen. As President Trump alluded to in his executive orders, the administration aims to create a more conducive environment for energy infrastructure projects to accelerate the the multi-trillion dollar U.S. electricity infrastructure upgrade and expansion required. These challenges are highlighted in a recent Department of Energy (DOE) report issued on December 20, 2024 that suggests a potential for a tripling or more of U.S. electricity generation capacity by 2050 DOE Releases New Report Evaluating Increase in Electricity Demand from Data Centers | Department of Energy . If the administration is successful in alleviating obstacles to realizing the massive new infrastructure, the scale of the opportunity is unprecedented for electricity utilities, transmission owners, and generators, further accelerating already evident industry growth.
National Energy Emergency Declaration: January 20, “Declaring a National Energy Emergency” - The executive order is primarily symbolic in proclaiming a “dangerous energy situation” and “inadequate energy supply,” in our view. The order largely establishes a broad new policy direction. President Trump’s order effectively promotes the “identification, leasing, development, production, transportation, refining, and generation capacity” in the U.S. to enhance critical mineral and energy resources. The order blames the Biden administration for a “precariously inadequate and intermittent energy supply” that is inadequate for “next generation technology.” The order seeks to “suspend, revise, or rescind all agency actions identified as unduly burdensome” and suggests the potential exercise of Federal eminent domain power and possible utilization of the Defense Production Act to expedite new energy and mineral resource projects. While we might disagree that an “emergency” currently exists, and the order’s encouragement of speeding some elements of new energy infrastructure certainly should generally be seen as a very positive development, the order’s supposition that more absolute infrastructure will necessarily reduce U.S. energy prices (especially electricity) is absolutely counterintuitive, in our view. The order reiterates a clear preference for dispatchable energy resources, going so far as to exclude intermittent solar and wind generation from its definition of “energy” or “energy resources” and ignoring their value and necessity.
Rescinded Biden Orders: January 20, “Initial Rescissions of Harmful Executive Orders and Actions” - Numerous Trump orders reversed various implementation orders of the IRA, IIJA, certain oil and natural gas development/leasing orders, and various other climate change and clean energy policy orders. The effects of these repeals are unclear other than indicating a broad new direction in U.S. energy and climate change policy. The order also rescinded Executive Order 14110 related to the “safe, secure, and trustworthy development and use of Artificial Intelligence.”
Tariffs: January 20, “America First Trade Policy” - President Trump has ordered the exploration of unfair trade practices and potential significant new tariffs on a wide range of goods from key U.S. trading partners. Significant proportions of energy infrastructure components utilized in part or in whole for energy infrastructure are imported. Some of these key infrastructure components include: wind and natural gas or steam turbines, electric cabling, electric transformers, solar panels, inverters, Li-ion batteries, battery packs, and related electronic and physical components, etc. Significant new tariffs, particularly on Chinese goods, would likely increase the cost of some energy infrastructure projects materially given the limited domestic manufacturing capacity and supply chains for those goods. Additionally, any potential tariffs imposed by the U.S. could weigh on global oil demand, especially if imposed on China, which is a significant oil consumer. Subsequently, President Trump has threatened at least 10% tariffs on all Chinese imports (not specified in the orders) as soon as February 1st. Conversely, some discussion of potential 25% tariffs on Canadian imports would increase oil prices; however, some believe that oil would be excluded from the tariffs, as the administration would not want to lift the costs to consumers at the pump.
Increased sanctions on Russia have the potential to further support higher oil prices: President Trump has threatened to impose a higher level of sanctions on Russia and tariffs on imports (initial sanctions were imposed by the Biden administration), if it does not reach an agreement to end its war against Ukraine. Supply impacts from sanctions on Russia have supported higher oil prices recently, and more stringent sanctions could provide further upside to oil prices.
Upside to oil prices from refilling the SPR: President Trump has promised to refill the Strategic Petroleum Reserve (SPR), which have declined to about 394 million barrels (as of January 10th), below the legal limit of 714 million barrels. This action would be a tailwind to support oil prices.
Expediting Energy Infrastructure/Ending EV Mandate: January 20, “Unleashing American Energy” - Probably the most substantive order for energy policy, in this very broad order, President Trump “eliminate(s) the electric vehicle (EV) mandate” and orders all U.S. agencies and departments to review ways to reduce rules and regulations that “potentially burden” energy infrastructure project development. In addition to demonstrating a clear preference for combustion engine vehicles, the order broadly seeks to encourage and expedite the “identification, development, or use of” critical mineral resources, coal, oil, natural gas, biofuels, and hydroelectric and nuclear electric generation projects. The order also encourages Federal agencies and departments to evaluate and reduce Federal siting and permitting friction for energy projects and alleviating some perceived burdens of environmental law and regulation. Section 7 of the order specifically states that it is “terminating the Green New Deal.” While not exactly accurate, the order does temporarily pause disbursements of funds from the Inflation Reduction Act of 2022 (IRA) and the Infrastructure Investment and Jobs Act (IIJA) for at least 90 days pending further administration review of program policies, including grants and loans, with no specific mention of tax subsidy policies. The review process could certainly at least postpone the construction of some renewable generation and/or electricity storage projects, causing issues for some market participants.
The order also restarts reviews of new LNG projects and seeks to expedite “domestic mining and processing of non-fuel minerals” deemed “critical” while encouraging uranium mining and nuclear fuel processing specifically. Oddly, while suggesting that the administration is “considering the elimination of unfair subsidies” for EVs, the order does nothing immediately specific to revise EV manufacturing or EV purchase subsidies. Section 2(f) of the order also suggests a new policy to “safeguard the American people’s freedom to choose from a variety of goods and appliances, including but not limited to lightbulbs, dishwashers, washing machines, gas stoves, water heaters, toilets, and shower heads,” suggesting some potential for less pressure on localized home natural gas bans. Overall, the order is constructive for many industries while avoiding any serious initial damage to the EV, Li-ion battery, etc. ecosphere.
Expediting Energy Infrastructure II/Reduced Regulation: January 20, “Regulatory Freeze Pending Review” - The order imposes a delay in the proposal “or issue of any new rule” by all U.S. agencies and departments pending an administration review of their compliance with the intent of new energy policy. The order also suggests that agencies/departments “consider postponing for 60 days” any pending new rules/regulations that are awaiting implementation via the Federal Register. This appears to be a broader corollary order to the “Unleashing American Energy” order.
Wind Power: January 20, “Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects” - The Trump executive order on wind electricity generation temporarily halts the issue of offshore wind leases. While not revoking existing offshore wind leases, it does order a review of the leases for possible termination or amendment. The order further ceases the issue of “new or renewed” permits, rights of way, or loans for offshore AND onshore wind electric generation projects pending a broad administration review of federal programs of an undetermined length. The order also suggests an administrative assessment that “consider(s) the economic costs associated with the intermittent generation of electricity and the effect of subsidies on the viability of the wind industry.” The executive order is somewhat ominous for wind generation and one wonders if a new wind winter could follow. Oddly, the order does not directly address solar generation despite the clear policy direction initiatives hostile to intermittent electric generation sources in general.
Climate Change: January 20, “Putting America First in International Environmental Agreements” - President Trump ordered the U.S. withdrawal from the Paris Accord and blocked U.S. funds for the International Climate Finance Fund. We do not see any material effect on domestic energy industries.
Alaska Energy & Minerals: January 20, “Unleashing Alaska’s Extraordinary Resource Potential” - President Trump’s order is about what you would expect. It reverses prior restrictions on the exploitation of mineral, oil, and natural gas resources in Alaska and restores previously rescinded leases. The order specifically seeks to expedite the exploitation of mineral resources, including within the Arctic National Wildlife Refuge, and expedite LNG projects. Overall, the E&P industry benefits from the pro-oil and gas administration; however, the improved regulatory landscape in Alaska (and the Gulf of Mexico) is unlikely to spark an increase in oil and gas activity in these areas over the next several years, as most operators are focused onshore in the Lower 48. Further, domestic onshore development, especially in the Permian Basin, will continue to grow modestly despite a relaxed regulatory environment on more expensive areas like Alaska and the Gulf of Mexico. However, we think these areas will be important to future oil production growth, as core onshore inventory is exhausted in the coming decade, particularly on the oil side.
Expect status quo from E&P producers despite a pro-oil and gas administration: Based on our conversations with E&P producers, we do not see the mantra of “drill, baby, drill” becoming reality, as oil producers are not incentivized to grow production at this stage. First, the investor demand for increasing energy exposure is absent with the S&P 500 Energy weighting at 3.26%. In addition, the forward oil price curve is backwardated (2026 and 2027 WTI oil strip prices are $67.91/bbl and $65.92/bbl, respectively, 8.5% and 11.2% lower than the front month of $74.26/bbl) and OPEC spare capacity remains elevated at more than 4.0 million bbls/d. OPEC+ spare capacity is particularly concerning with pressure from President Trump on Saudi Arabia and OPEC to lower prices by increasing output. We see the potential for natural gas companies to grow production in 2026+, but it is too early to make the call, as capital decisions require stable commodity prices and time to plan.
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