We’ll see more fracking, more pipelines, a defanged EPA, and no carbon tax.
As he declared in his victory speech last night, President Trump will root his efforts to make America great again in vast infrastructure projects, tax cuts and pro-business policies that he says will result in millions of new jobs and economic growth. That’s good for steel and concrete suppliers (Nucor is up 12% today). And great for fossil fuel producers.
With control of the White House and Congress, President Obama’s coal-killing Clean Power Plan is likely history. The EPA will be declawed. The U.S. will not ratify the Paris climate accord. And there will be no chance of a federal carbon tax or cap-and-trade regime. That’s good news for coal miners (like Foresight Energy, up 24% today) and owners of coal-fired power plants. Bad news for environmental zealots.
“On day one, he will commence by undoing the onerous regulations placed on every industry in the past eight years,” said billionaire oilman Harold Hamm in a statement to Forbes after the election. “We can now look forward to a reliable supply of affordable energy.”
Expect American oil and gas production to surge. We will see an abrupt end to the Bureau of Land Management’s efforts to grab authority to regulate hydraulic fracturing on federal lands. A federal case on BLM’s overreach in making fracking rules was set to be heard by the 10th Circuit Court of Appeals Jan. 17. Trump’s BLM will have no interest in regulating fracking. Voters in Youngstown, Ohio rejected for the sixth time an initiative that would have banned fracking locally. Though a frack-ban did pass in Monterey County, Calif. That’s no biggie: oil companies have plenty more drilling sites frack-friendly Texas, Oklahoma and North Dakota. The likelihood of Trump appointing Hamm secretary of energy is vanishingly small — he has wells to drill. But the Trump advisor is gleeful in the knowledge that with Hillary gone fracking won’t be going anywhere. “America will thrive during a Donald Trump presidency,” says Hamm. “I can tell you now that we will be energy independent.” Hamm’s Continental Resources closed up 3.50% Wednesday.
Trump’s pro-infrastructure regulators will unlock private capital for pipeline projects. On the campaign trail Trump had expressed his support for the Keystone XL pipeline, and today TransCanada announced its determination to reapply for its permits and build the thing (TransCanada closed up 2.40% on the day). Trump will also likely push through the North Dakota Access Pipeline; its sponsor, Energy Transfer, was up 16%. The recent outages on the Colonial pipeline underscore the need for America to invest in more pipeline infrastructure.
A Trump bump for oil, gas and coal could mean fewer dollars flowing into renewables and nuclear. Though candidate Trump spoke about the need for America to build more nuclear power plants, nothing will change the fact that without a cost of carbon neither nuclear nor renewable can compete with natural gas. Big wind turbine maker Vestas dropped 16% today after Trump’s victory, while Tesla is down 4.4%. As Forbes contributor Michael Lynch (@laffngeconomist) tweeted last week, Tesla’s big new solar roof system is “probably the most expensive way to reduce GHG emissions short of lawyers on hamster wheels.” That said, Trump is likely to be “more everything” when it comes to energy, so don’t expect any cuts to green power subsidies.
A Trump victory is bad news for OPEC. More American oil will compete head-to-head with the cartel. Since President Obama signed a law last year lifting the ban, exports of American oil have surged to 700,000 bpd, as much as Qatar. Worth noting that OPEC tyrannies have been big donors to the Clinton Foundation, with Saudis giving about $30 million, Qataris $5 million, Kuwait up to $10 million and millions more from the UAE.
Candidate Trump said last March that he would seek to block imports of oil from Saudi Arabia (currently about 1 million bpd) unless the Kingdom did more to fight ISIS. This is exceptionally unlikely. Saudi Aramco’s refineries on the Gulf Coast are optimized for Saudi crude and blocking their supplies would be seen as a blow against blue collar refinery workers, who likely voted overwhelmingly for Trump.
Could President Trump scrap Obama’s deal with Iran? In March he told Israeli group AIPAC that dismantling the deal would be a “number-one priority.” Whether or not he follows through on that threat, expect Iran to maximize output in the coming months, just in case. That will hurt OPEC’s efforts to cut output and raise prices.
Gasoline prices on this election day averaged $2.20 a gallon. Four years ago it was $3.46. Watch for a jump in SUV sales.