In this week’s Weekly Market Recap, JP Morgan, one of the Portfolio Strategists we utilize for client accounts, wrote the following about the executive orders President Trump recently signed regarding energy and the possible impact they may have…
Immediately following his inauguration, President Trump signed a slew of executive orders (“EO”) and made several declarations related to major policy themes from his campaign, including boosting U.S. energy production. These EOs were aimed at deregulating oil drilling (“Drill baby, Drill”) and increasing energy supply. President Trump also declared a “National Energy Emergency” to help address the energy needs for AI and data center build-outs.
Despite the “energy emergency” claims, the U.S. is producing energy in record quantities. As shown in this week’s chart, the difference between primary energy production and consumption has reached the highest levels in recorded history. While these EOs may increase U.S. energy production going forward, the overall sector could continue to face performance challenges due to these supply/demand imbalances in energy markets.
The true impact of these EOs remains unknown. The U.S. is already the world’s largest crude oil producer and LNG exporter, producing 13.4million barrels per day and aiming to increase LNG capacity by 50% in 2025 alone. It is unlikely that energy companies will want to significantly ramp up supply, resulting in a decrease in oil and gas prices and impacting profitability. For example, oil exploration and
production firms need oil prices at ~$64 on average to profitably drill a new well, according to a 2024 Dallas Fed survey, leaving little room for current prices to decline. Additionally, even deregulating Arctic drilling, a specific EO target, high costs have led oil drillers to shift more of their capital spending from this region toward process efficiency projects.
While the term “energy emergency” seems apocalyptic, the reality is investors probably do not have too much to worry about with energy markets.
