Elected leaders will be ushering in expansive energy policies for 2025 and other policies that will impact energy markets. U.S. leadership in the energy transition may stall even with Tesla’s owner holding a Cabinet-level position in the new Trump administration.  

The conflicting policy pronouncements of the incoming Trump administration deserve a quick look. His promise to lower gasoline prices to $1.87/gal will not come via “drill, baby, drill.” His team has already made entreaties to Saudi Arabia to lower the price of crude to accommodate the pledge. If OPEC+ delivers, then U.S. producers will feel pain once again.  

The new Trump administration may well try to tighten sanctions on Iranian access to the oil markets, but we can expect price caps and restrictions on Russian oil and gas. Neither change in policy will have an impact on global prices. Iranian and Russian oil is reaching the global market in quantity via circuitous routes in the Middle East and Asia, but reaching the market, nonetheless. Following the release of sanctions on Iran during the Obama administration, the global oil price rose because Iran no longer had to sell into the shadow market at a discount. Azerbaijan’s “production” dropped by 500,000 bbl/d.

The specter of the U.S. increasing tariffs may have a more positive impact for domestic oil and gas producers at the expense of consumers in the short run.

Tariffs by themselves do not necessarily lead to recessions, but a trade war with Canada and Mexico will have a far-reaching impact across the U.S. economy. The Canada-Mexico-U.S. trade and investment flows are $1.8 trillion annually. But if the Trump administration follows through with 25% tariffs on all Canadian and Mexican goods and services, the inbound price on 4 MMbbl/d of U.S. crude oil imports will increase by $7 to $15/bbl. Domestic producers will enjoy the ability to match the price increase on the imports. Consumers will cry foul.

The Trump administration will certainly roll back the Biden administration’s methane rules and regulations. While this will not impact the major oil companies that are now moving toward smaller environmental footprints, the independents will enjoy the delay—for however long it lasts.

Produced water, always a problem for producers, will be an even greater problem for 2025.

The Permian Basin produces approximately 21 MMbbl/d, with that number forecast to continue to increase. With disposal and remediation costs at least $1/bbl, water disposal has become an $8 billion industry annually.

As Permian subsidence continues due to oil and gas production, and the prevalence of earthquakes and blowouts of abandoned wells increases, the reinjection of water becomes more problematic. Of course, a higher oil price would more than offset the increased costs of remediating the water for agriculture.

One Trump policy initiative will undoubtedly cause havoc in the oil patch. Mass deportations will disrupt work crews and their families across the Permian and other basins in the U.S. Apart from losing workers directly, the diminished workforce will demand higher wages. Again, these could be offset by higher oil prices.

President-elect Donald Trump has pledged to lower the costs of electricity to Americans. This policy promise is unattainable.

Historically low natural gas prices have kept wholesale electricity prices historically low. The other components of the consumer’s electricity bill are driving the higher prices. These include initiatives to update long-neglected transmission and distribution infrastructure, add transmission lines to bring electricity from rural wind and solar farms to consumers, and to harden local infrastructure against weather events.

There is no federal remedy that can save the U.S. consumers from increasing electricity prices.  

Expected electricity demand growth from AI data centers will practically double U.S. electricity consumption in the next decade. Grid operators are not allowing the data centers to remove power plants from their current portfolios—mainly because supply growth has not kept pace with demand growth, and especially so in deregulated grids in California, Texas and the Midwest.

New data centers will be forced to build their own power plants, providing a boon for natural gas consumption. Small modular nuclear power plants will benefit also.

2025 for energy will be challenging for undercapitalized players and a buying opportunity for those with capital. By their nature, transitions are unsettling, and while the transition to cleaner fuels is clearly underway, 2025 will be marked by a return to state-led initiatives.

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