What Trump 2.0 Could Mean for US Energy Stocks By Investing.com

The 2024 U.S. presidential election could bring significant changes to the energy sector, especially if Donald Trump returns to office, Mizuho analysts said in a note on Tuesday.

Based on a comprehensive analysis of Trump’s proposed energy policies and historical performance, several key impacts on US energy stocks can be expected.

Trump’s energy platform

Unleashing American Energy

Trump’s 2024 campaign emphasizes strong growth in domestic energy production. The goal is to lift restrictions on oil, coal, and coal production to lower energy costs and establish the U.S. as the world’s leading energy producer.

The policy is expected to benefit traditional energy sectors, particularly oil and gas, but also involves potential reductions in regulatory oversight and environmental protection.

Regulatory and fiscal changes

The Trump administration plans to reduce federal regulations it deems “costly and burdensome.” That includes easing restrictions on American energy production and possibly eliminating vehicle efficiency standards, Mizuho added.

Moreover, Trump’s agenda includes cutting federal spending, which could lead to lower subsidies for renewable energy technologies and lower budgets for regulatory agencies such as the Environmental Protection Agency (EPA).

Fiscal policies

Trump aims to cut taxes and make permanent provisions of the Tax Cuts and Jobs Act. This includes the repeal of the alternative minimum tax for corporations, which has hit US oil and gas companies with net operating losses.

Impact on different energy sectors

Oil and gas

Trump’s policies are expected to favor the oil and gas sector through reduced regulation and increased production. Key beneficiaries include companies such as Chevron (NYSE: ), ConocoPhillips (NYSE: ) and EOG Resources (NYSE: ), which could see positive impacts from easing restrictions and facilitating offshore projects, Mizuho said.

However, the mandate to lower gasoline prices could lead to OPEC+ oil supply expansion, potentially hurting oil-focused exploration and production companies like ExxonMobil (NYSE: ) and Occidental (NYSE: ) Petroleum.

Midstream and infrastructure

The push for higher domestic energy production and infrastructure expansion is likely to benefit midstream companies. Firms involved in energy transportation and storage, such as Williams Companies (NYSE: ) and Targa Resources (NYSE: ), could see increased demand and investment.

Renewable energy

While the Trump administration could slow the expansion of subsidies for renewable energy, some incentives, such as those for green hydrogen and carbon capture, could be preserved.

However, companies that rely heavily on current subsidies and climate policies, such as First Solar (NASDAQ: ) and NextEra Energy (NYSE: ), could face headwinds.

Lower interest rates and a focus on US manufacturing could provide some counterbalance, providing support to renewables stocks indirectly through broader economic growth.

Economic and market implications

Inflation and energy costs

A core tenet of Trump’s energy policy is reducing energy costs, which is seen as crucial to controlling inflation and boosting economic growth.

Market performance

Historically, energy stocks have underperformed the broader market during Trump’s first term, even excluding the 2020 pandemic year.