After countless, excruciating months of non-stop media coverage, the US elections are finally complete. Donald Trump will indeed be the next President of the United States. Both the Senate and House will also be controlled by the Republican Party.

While it's safe to say that there have already been dozens, if not hundreds, of articles written which speculate about how Trump's second administration and a Republican majority Congress will likely govern in 2025 and beyond, we thought it would be worthwhile to explore how the new White House, as well as the new Congress, are likely to impact global energy commodity markets.

What follows is a summary of our current high-level thought thoughts about the primary questions we have received from clients over the course of the election cycle through today.

How is the new Trump administration and a Republican majority Congress likely to change energy market policies, and how are said policies likely to change global supply and demand?

Increase in Domestic Oil and Gas Production: Trump and many Republicans in Congress have shown plans to boost U.S. oil and gas production by reducing regulatory barriers and promoting drilling, including potential expansions in offshore and federal land exploration.

Expanded LNG Exports: Both Trump and a Republican Congress are likely to further ease LNG export restrictions, positioning the U.S. as a more dominant LNG supplier. With European markets continuing to seek alternatives to Russian gas, increased U.S. LNG exports could meet a significant part of this demand. Yet, this increase in U.S. supply may drive global natural gas prices down - harming American producers - if demand doesn’t keep pace, especially in Asia and Europe.

Market Price Implications: Increased U.S. production could put downward pressure on global energy prices by increasing supply. But this impact would likely be offset by OPEC+ countries adjusting their production quotas. Additionally, if geopolitical tensions rise (e.g., with Iran), any reduction in Middle Eastern supply could offset increases from the U.S., leading to prolonged price volatility.

How is the new Trump administration and Republican majority Congress likely to change US geopolitical policy on Russia, Israel, Iran, and Venezuela?

Russia: The new Trump administration is expected to target the Kremlin with tougher energy sanctions if Russia refuses to negotiate a Trump-led peace agreement to resolve the Ukraine conflict. If Russia rejects a peace deal, many geopolitical analysts have suggested the new administration would likely enforce much harsher sanctions against them and that these stricter measures could extend to Russia’s central bank or other energy exports (e.g. LNG, LPG, distillates) impacting trade with countries like India and China. During his first term, while Trump was cordial with Vladimir Putin in bilateral meetings, his Administration was more assertive towards Russia behind the scenes.

Israel: Alignment with Israel, continuing with support for defense initiatives and supporting alliances that bolster U.S.-Israel energy and technology collaborations are likely to be as strong, if not stronger, during the second Trump administration as it was during his first term. Heightened U.S.-Israel cooperation could also change Middle Eastern dynamics, intensifying regional tensions, which can influence energy markets if conflicts escalate.

Iran: The earlier Trump administration's "maximum pressure" approach to Iran focused on sanctions targeting the country's oil exports, reducing its market share and harming Iran’s domestic economy. If a similar strategy is reintroduced, it could reduce Iran's oil export potential, but Iran, and its primary customers, have already developed robust systems to avoid sanctions and will likely continue to do so. A decline in Iranian exports would indeed tighten global oil supplies, particularly in Asian markets reliant on Iranian crude, and escalate tensions in the Strait of Hormuz, a critical transit route for crude oil and refined products.

Venezuela: The first Trump administration imposed sanctions on Venezuela’s state oil company PDVSA to curb the Maduro government’s oil revenues. But there is speculation that the new Trump administration might adopt a more flexible approach, depending on U.S. energy interests and potential geopolitical strategies. A reduction in sanctions could boost Venezuelan oil production, adding supply to the market, while stricter enforcement could further constrain global oil availability.

How is the new Trump administration and a Republican majority Congress likely to change renewable energy markets (e.g., solar, wind, nuclear, batteries, etc.)?

Reduced Federal Support for Renewables: A renewed focus on fossil fuel development could come at the expense of renewable energy initiatives. In the past, Trump has expressed skepticism toward the efficiency and reliability of renewables, suggesting that policies may shift to favor conventional energy sources. This could lead to reduced incentives, tax credits, and grants for wind, solar and battery projects, slowing their expansion.

Potential Impact on Battery Storage Development: Federal funding and incentives have been critical in scaling battery storage technologies, which are essential for stabilizing renewable energy supply. The new administration might deprioritize funding for battery technology research and deployment, affecting grid resilience and making it more challenging to integrate renewables at the scale needed for energy transition goals.

Nuclear Energy as a Viable Alternative: Unlike other renewables, nuclear energy may receive bipartisan support due to its reliability as a low-carbon baseload power source. Trump has shown openness to nuclear power, and the new administration may include nuclear as a critical part of its energy strategy. This could mean streamlined approval processes and potential funding for small modular reactors (SMRs), which are gaining attention as a safe, flexible, and efficient nuclear possibility.

Grid Reliability Concerns Favoring Conventional Power: With an emphasis on grid reliability, a Republican-led government may argue for a more balanced energy mix that includes fossil fuels and nuclear alongside renewables, citing issues of intermittent supply from wind and solar. This could lead to policies favoring coal and gas plants' continued operation, justified by their role in ensuring consistent power availability during peak demand.

Regulatory Rollbacks Affecting Renewables’ Competitiveness: By rolling back environmental regulations, the Trump administration might lower operating costs for fossil fuel plants, indirectly affecting the competitiveness of renewables. This shift could make it challenging for wind and solar projects to achieve parity with fossil fuel generation costs without federal subsidies.

How is the new Trump administration and Republican majority Congress likely to change projects – both current and future - under the Inflation Reduction Act of 2022?

Rescinding Unspent Funds: Some of Trump's senior advisors have suggested that unspent funds from the IRA could be redirected or eliminated. This would affect subsidies and incentives aimed at renewable energy projects, such as solar and wind power developments, as well as electric vehicle infrastructure. The move could create uncertainty for ongoing clean energy projects that rely on these funds to still be competitive with traditional energy.

Potential Shift in Energy Policy Focus: In place of clean energy investments, there may be a renewed emphasis on fossil fuel infrastructure, including pipelines and export terminals. This shift could stall the growth trajectory for renewables, especially in sectors where federal support has spurred recent developments. The scaling back of IRA projects might also hinder U.S. commitments to reducing carbon emissions, affecting international climate agreements and goals.

Investment Implications: With reduced government support, renewable energy companies may face funding challenges, slowing private sector investments in green technology. This shift may affect global investors’ interest in U.S. renewable projects, given the risk of policy reversals. While some states may continue their green initiatives, the broader national shift could affect the long-term growth of renewables.

In the coming weeks, we will also explore how Presidential and Congressional transitions impact energy commodity prices, especially forward prices, during both the transition periods and the early days of new administrations.