Energy stocks jumped after the November election because investors thought new management in Washington would be their ticket to wealth. But what if it’s not?
On the surface, the stars seem lined up for Big Oil & Gas. President Trump promised to reduce the industry’s regulatory burden and open more federal land and offshore areas to drilling.
Furthermore, lower taxes and friendlier regulation will unleash animal spirits, boosting economic growth – and energy demand with it.
Maybe it will all work that way, but simple economics tells me it won’t be so easy.
The Bullish Case for Energy
So here’s what we know: Energy production is a highly regulated industry, and Trump will make it less so. The president demonstrated this last week when he revived the Keystone and Dakota Access pipeline projects, which had been stalled by his predecessor.
Also, Trump’s key appointees should be a boon for the industry:
Scott Pruitt, nominated to lead the Environmental Protection Agency, was the energy industry’s best friend as Oklahoma attorney general. Former Texas Governor Rick Perry, Trump’s choice for secretary of energy, once advocated abolishing the very department he will soon lead.
This post was published at Mauldin Economics on JANUARY 31, 2017.
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