What Trump 2.0 could mean for U.S. energy stocks

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

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

Trump’s energy platform

Unleashing American energy

Trump’s 2024 campaign emphasizes a robust increase in domestic energy production. The goal is to lift restrictions on oil, , and coal production to reduce energy costs and establish the U.S. as the leading global producer of energy​.

This policy is expected to benefit traditional energy sectors, particularly oil and gas, but it also implies potential reductions in regulatory oversight and environmental protections.

Regulatory and fiscal changes

The Trump administration plans to cut what it deems as “costly and burdensome” federal regulations. This includes easing restrictions on American energy production and potentially eliminating vehicle efficiency standards​, Mizuho added​.

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

Tax Policies

Trump aims to lower taxes and make permanent provisions of the Tax Cuts and Jobs Act. This includes repealing the Corporate Alternative Minimum Tax, which has affected U.S. 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 regulations and increased production. Key beneficiaries include companies like Chevron (NYSE:), ConocoPhillips (NYSE:), and EOG Resources (NYSE:), which could see positive impacts from eased restrictions and facilitated offshore projects, Mizuho said.

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

Midstream and infrastructure

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

Renewable energy

While the Trump administration might slow the expansion of renewable energy subsidies, some incentives, like those for green hydrogen and carbon capture, might be retained​.

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

Lower interest rates and a focus on U.S. manufacturing could provide some counterbalance, offering support to renewable stocks indirectly through broader economic growth​.

Economic and market implications

Inflation and energy costs

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

Market performance

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