the trump effect. oil and gas, and investing in it. what’s next?
I was on a call last week with a fund manager and the conversation centered on one topic—the Trump effect on Oil and Gas. Donald Trump will officially take office in a few weeks. For energy leaders and investors alike, this isn't just political news; it’s a potential game-changer for the industry.
I can’t help but reflect on the last time Trump led the nation’s energy policy. Those years weren’t just a turning point—they were a launchpad. Deregulation, ambitious fiscal policy, and a renewed focus on energy independence created an era of unprecedented opportunity. And in 2018, the US became the top producing oil country in the world.
Today, most of us in the industry, both in operations and on the capital side (upstream, midstream, downstream, fund managers, institutional investors, accredited investors) are preparing for the Trump effect 2.0. But what does it mean for producers and investors in the near term?
Let’s examine the groundwork Trump laid during his first term, the most pressing changes expected in the initial months of his return to office, and what you can do right now to capitalize on this new landscape.
The First Trump Administration Set the Tone
From 2017 to 2021, Trump's policies reshaped the oil and gas industry. The administration’s emphasis on fossil fuels, deregulation, and energy exportation created fertile ground for growth. For anyone managing investments in the sector, the alignment between policy and market potential was too significant to ignore.
Key Policy Moves and Industry Impacts
Regulatory Rollbacks
Trump’s cutting of red tape gave oil and gas operators room to breathe and expand. Projects that had previously spent months bogged down in permitting could move forward with agility. For fund managers and private equity firms, this meant accelerated timelines and better return horizons.
Tax Advantages
With the introduction of the Tax Cuts and Jobs Act, energy companies saw immediate financial benefits through enhanced deductions for drilling costs and depletion allowances. Investors leveraging these policies saw not just higher profits but also tax savings that enhanced overall portfolio performance.
Pipeline Advancements
Under Trump’s leadership, high-profile projects like Keystone XL moved forward despite public opposition. For midstream investors, this translated into more reliable infrastructure and better margins.
These policies translated into real growth. Companies like Pioneer Natural Resources and Enbridge seized the moment, delivering value to shareholders and offering lessons on how to thrive in shifting policy landscapes.
What to Expect in Trump’s First 100 Days
Now that Trump’s inauguration is just days away, the industry is abuzz with speculation over his immediate actions.
Immediate Policy Actions to Watch
Federal Lease Expansions
Within his first month in office, Trump is expected to make moves to open new federal lands to drilling. This includes untapped areas like the Gulf of Mexico and potentially revisiting Arctic exploration. Operators in these regions could see contract opportunities spike, creating immediate plays for upstream investments.
Reversal of Climate Policies
Expect Trump to target Biden-era climate measures. Methane caps and renewable incentives are likely on the chopping block, directly impacting operating costs for oil and gas producers. This doesn’t just create breathing room for fossil fuel giants—it sets the stage for smaller, innovative firms to ramp up activities.
Fast-Tracked Energy Infrastructure
Trump has signaled plans to advance stalled pipeline and LNG export facility constructions—a boon for midstream investments. For fund managers monitoring transport bottlenecks, these moves could unlock high-yield opportunities in logistics and export agreements.
Trade Policy Adjustments
Renewed focus on energy exports could reframe LNG distribution on the global stage. Trade relationships with energy-starved regions in Asia and Europe may be revisited, creating avenues for institutional fund deployment in terminal expansions and shipping routes.
The tone of Trump’s policies is clear. While the rest of the world continues to toy with the reality of unsustainable renewables, his administration aims to cement the U.S. as the leader in oil and gas.
Why Fund Managers Need to Act Quickly
Even socially liberal, fiscally moderate Warren Buffett used 2024 to reallocate a substantial portion of Berkshire’s tech portfolio to Oil and Gas. In Q2, Berkshire cut its Apple stake nearly in half, trimming it down from $135 billion to $84 billion—a massive $51 billion shift. That capital went straight into Oxy. Buffett was in position to catch the Trump tailwind long before it spooled up. Fund managers, capital firms, and accredited investors may not be in Buffett’s seat (as few are), but still can anticipate the likely positive changes, adjust their portfolios, and align with the emerging opportunities. Or sit this one out.
Navigating Risk in a Trump-Led Energy Market
For every opportunity Trump’s policies bring, there are risks. The global market doesn’t operate in isolation, and challenges like geopolitical competition and environmental pressures persist.
RISKS TO CONSIDER
Global Competition vs. U.S. Policy
While Trump’s policies may look inward, energy markets are global. OPEC and other energy-heavy nations will respond to U.S.-centric policies with strategies of their own. Fund managers should actively monitor supply dynamics and potential trade conflicts.
Volatility Driven by ESG Narratives
While the rise of ESG mandates has cooled considerably. Institutional investors will still demand accountability from fund managers on cleaner operating. Identifying operators actively engaging in carbon offsets or low-emission technology may reduce risk.
Price Fluctuation Chaos
Rapid shifts in policy can provoke equally dramatic shifts in oil prices. For institutional investors, volatility demands better hedging mechanisms, from commodity-linked derivatives to cash-flow monitoring.
Strategic Moves to Stay Ahead
Diversify Intelligently. Don’t get caught focusing only on upstream investments. Midstream and downstream sectors often provide stability that cushions against policy-driven disruptions.
Identify Tech-Focused Leaders. Companies investing in methane reduction or carbon capture will likely emerge as dual winners under loose regulations and ongoing ESG scrutiny.
Expand Globally. Look beyond U.S. borders and evaluate energy investments in markets less liable to political whiplash.
Best,
