The United States faces a highly unpredictable and potentially divisive election. Donald Trump, the presumptive Republican presidential nominee, is embroiled in a mountain of legal troubles, including 91 charges in two different state courts and two different federal districts, as well as lawsuits in several states seeking to disqualify him from the Presidency.
Despite legal baggage likely to hamper his campaign, Trump obtains favorable results against President Joe Biden and even leader in seven key statesand only time will tell if he will become the country’s 47th president.
Energy under Trump
As Energy Intel noted, a Trump victory is likely to upend U.S. domestic and foreign policy. Trump and Republicans have always been pro-fossil fuels, and he would likely seek to boost the nation’s oil and gas sector, expanding access to federal lands and cutting taxes.
Along the same lines, Trump has never hidden his contempt for clean energy (especially “windmills”). He blasted the Biden story Inflation Reduction Act, describing it as “the largest tax hike in history” thanks to its $369 billion in tax breaks and clean energy subsidies. He has repeatedly criticized his successor’s climate policies, blaming them for raising fuel prices and undermining U.S. “energy independence.”
The IRA has so far survived Republican attempts to repeal significant parts, but could be under serious threat under Trump’s presidency as Red states actually benefited more law than blue states despite this. Trump may not have the power to repeal the law unilaterally, but he could certainly make it “more difficult to implement,” as Shannon Rinehart, portfolio manager at Threadneedle, pointed out. His administration could impede climate law through executive action by revising Treasury Department rules that have not yet been finalized, withholding some of its loans and grants, and/or tightening government appropriations limits. ‘tax.
“While politicians in a possible Trump administration talk about rolling back the IRA, the reality is that it would take an act of Congress to do so.» Shannon Rinehart said.
“Some parts of the IRA will receive more resistance from Republicans than others. We try to avoid these elements. Chris Berkouwer, portfolio manager at Robeco, reported this. According to Berkouwer, investments to improve grid infrastructure will likely have bipartisan support; However, while Democrats might like to see the grid strengthened to allow the deployment of more renewable energy, Republicans are likely to favor renewing infrastructure serving coal and gas-fired power generation utilities .
Investments dedicated to the booming electric vehicle sector could also face a setback under Trump. Last year, at a rally in Detroit, Trump attacked the industry, saying electric vehicles are “too expensive” and “don’t go far enough.” There’s a lot at stake here. The auto industry has already announced more than $100 billion in investments in electric vehicles, creating more than 100,000 jobs in the United States.
In November 2021, the The Biden administration signed THE Infrastructure Investment and Jobs Act (IIJA). The IIJA authorizes $1.2 trillion in transport and infrastructure spending; 43 billion dollars (not counting loans and tax incentives) under flexible spending could be used for battery manufacturing, retooling automotive industry facilities, retraining and rehiring existing auto workers and network updates while more $7.5 billion will support the construction of electric vehicle infrastructure.
Internationally, a new Trump presidency is likely to lead to increased tensions between Washington and China, Iran, Venezuela and even the United States’ Western allies due to its opposition to NATO and of his support for autocratic leaders like Russian President Putin. With its “America First” policy, the United States could see a new round of never-ending trade wars with China and Mexico. Upcoming elections in major oil and gas provinces – Mexico, the UK, Venezuela and Namibia – could also be affected.
Energy under Biden
The investor universe can expect a second Biden term that will see him double down on his clean energy policies, but find himself in an even deeper legislative impasse if Republicans retain control of at least least one house of Congress. Biden could pursue climate policies more aggressively during his last term.
Last October, President Biden announced the locations of seven regional hydrogen hubs is expected to receive $7 billion from the government under the bipartisan infrastructure law. The hubs will produce green hydrogen as well as hydrogen from natural gas and nuclear power. Passed by Congress in 2021, the law allocated up to $7 billion to launch the Regional Clean Hydrogen Hub Program to finance 6 to 10 regional clean hydrogen hubs across the country. The hydrogen project is part of Biden’s project ambitious climate goals in which he pledged to reduce the country’s greenhouse gas emissions by 50-52% from 2005 emissions levels by 2030.
In this context, it is somewhat ironic that fossil fuel investors are faring much better than their clean energy brethren under the Biden administration. The preferred benchmark for oil and gas, the Select Energy Sector SPDR Fund (NYSEARCA:XLE), has doubled since Biden took office while the iShares Global Clean Energy ETF (NASDAQ:ICLN) fell almost 60%. The current year shows a similar trend with the oil and gas sector stable while clean energy stocks are deep in the red. It therefore makes more sense to bet wisely on individual stocks in one or another sector rather than betting on an entire sector, regardless of who the next US president is.
By Alex Kimani for Oilprice.com
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