The energy sector surged the day after Donald Trump’s 2024 presidential victory, with the Energy Select Sector SPDR Fund (XLE), representing energy stocks in the S&P 500, climbing nearly 4%.

This rally reflects market optimism for fossil fuel investments under Trump’s anticipated pro-oil and gas policies. In contrast, renewable energy companies faced declines, with U.S. solar giant First Solar dropping over 10%.

These market reactions hint that Trump’s second term will prioritize traditional energy sectors, potentially limiting support for renewables while advancing oil and gas expansion. Here’s what to expect.

Trump’s Vision for U.S. Oil and Gas

During his victory speech, Donald Trump underscored his plans to further boost U.S. oil and natural gas production, currently both at record levels. Trump asserted that the U.S. has more “liquid gold” than other nations, including Saudi Arabia and Russia. Trump’s reelection positions him to enact significant policy shifts to further increase U.S. fossil-fuel production.

Pressure on States and the Private Sector

Trump has criticized green technologies like wind turbines and electric vehicles and promised to rescind unspent climate funds.

Private businesses are likely to continue investing in clean energy technologies. Many states are also expected to maintain their own clean energy initiatives, regardless of federal policy shifts. Over the past decade – even during Trump’s previous term – there was significant growth in the renewable sector due to private investments. But there will likely be drops in federal spending

Proposed Cuts to Climate and Environmental Agencies

Key figures in Trump’s circle support dismantling federal climate initiatives, including repealing tax incentives from the Biden administration’s Inflation Reduction Act (IRA). Some have proposed eliminating the Department of Energy’s Loan Programs Office and Environmental Protection Agency departments focused on climate-related activities.

Future of Clean Energy Tax Credits and Loans

Trump’s administration may attempt to restrict clean energy tax credits and scale back support for projects like green hydrogen production. Additionally, Trump could target the Department of Energy’s green-tech loan program, which currently provides substantial funding for new technologies. Some stakeholders advocate for redirecting this support to fossil-fuel ventures.

Impact on Key Energy Sectors

Electric Vehicles: Trump aims to curb federal support for electric vehicles (EVs), potentially targeting EPA emissions regulations that encourage EV adoption. Oil-refining advocates are also lobbying for changes to EV tax credit qualifications.

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

Liquefied Natural Gas (LNG) Exports: Trump has committed to resuming LNG export permitting, which would benefit numerous natural gas and midstream companies.

Offshore Wind: Trump has criticized the offshore wind industry and may order a permitting moratorium, affecting projects along the U.S. East Coast.

Conclusion: Shifts in U.S. Energy Policy

Trump’s win could reshape U.S. energy policy by prioritizing fossil fuels while challenging climate initiatives. Although the federal approach may shift, state and private efforts to invest in renewables are expected to continue, underscoring the complex interplay between environmental goals and economic interests.