The day after Donald Trump won the 2024 presidential election, the energy sector surged, with the Energy Select Sector SPDR Fund (XLE), which represents energy stocks in the S&P 500 index, rising nearly 4%.

The rise reflects the market's optimism about fossil fuel investments under Trump's expected pro-oil and pro-gas policies. In contrast, renewable energy companies suffered a decline, with the US solar giant First Solar's stock price falling more than 10%.

These market reactions suggest that Trump's second term will prioritize traditional energy industries, and may limit support for renewable energy while promoting oil and gas expansion.

Trump's Vision for US Oil and Gas

In his victory speech, Donald Trump emphasized that he plans to further increase US oil and gas production, both of which are currently at record levels. Trump claimed that the United States has more "liquid gold" than other countries such as Saudi Arabia and Russia. Trump's re-election allows him to implement major policy shifts to further increase US fossil fuel production.

Pressure on the state and private sector

Trump has criticized green energy technologies such as wind turbines and electric vehicles and promised to withdraw unused climate funds.

Private industry is likely to continue investing in clean energy technologies. Many states are also expected to maintain their own clean energy programs regardless of changes in federal policy. The renewable energy industry has seen significant growth over the past decade—and even during Trump’s last term—thanks to private investment. But federal spending is likely to decline.

Proposed cuts to climate and environmental agencies

Key figures in Trump’s circle support repealing federal climate initiatives, including repealing the Biden administration’s Inflation Reduction Act (IRA) tax benefits. Some have proposed eliminating the Department of Energy’s loan program office and the Environmental Protection Agency’s division focused on climate-related activities.

Future of clean energy tax credits and loans

The Trump administration is likely to seek to limit clean energy tax credits and reduce support for projects such as green hydrogen production. In addition, Trump is likely to target the Department of Energy’s green tech loan program, which currently provides significant funding for new technologies. Some stakeholders have advocated for redirecting that support toward fossil fuel companies.

Impact on major energy sectors

Electric vehicles: Trump aims to limit federal support for electric vehicles (EVs), likely targeting EPA emissions regulations that encourage EV adoption. Petroleum refining advocates are also lobbying for changes to EV tax credit eligibility.

Oil and Gas Production: Trump has pledged to expand drilling on public lands and reopen offshore oil and gas leasing. This could boost oilfield development and reduce energy costs.

Liquefied Natural Gas (LNG) Exports: Trump has pledged to restore LNG export permits, which would benefit numerous natural gas and midstream companies.

Offshore Wind: Trump has criticized the offshore wind industry and may order a moratorium on permits, which would affect projects along the U.S. East Coast.

Conclusion: A Shift in U.S. Energy Policy

Trump’s victory is likely to reshape U.S. energy policy, prioritizing fossil fuels while challenging climate initiatives. While the federal government’s approach may change, state and private investments in renewable energy are expected to continue, highlighting the complex interplay between environmental goals and economic interests.