Energy Crossroads: Navigating the Future Under Republican Candidates

2024 Election, Economy

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Executive Summary

Shifts in Energy Policy: U.S. energy politics are in the midst of the most tectonic shifts since the Arab oil crisis of the 1970s. After 50+ years of exclusive focus on energy security, Republican candidates are being forced to contend with societal expectations surrounding reductions in greenhouse gas emissions, while others show an openness to renewable technologies.
Global Energy Dominance & Policy Direction: America’s potential for global energy dominance, largely due to advances in oil and gas production technology, is a central theme. The document explores how the U.S.’s deployment of energy assets will shape the future energy landscape.
Candidates’ Divergent Approaches: It provides an overview of individual Republican candidates’ energy policies, noting their varied approaches to conventional energy, renewables, and climate change. America is poised for global energy dominance in 2024 and beyond, due in large part to advances in oil and gas production technology. However, how the US decides to deploy considerable energy assets will shape the winners and losers of the energy future.

Context

The price of a gallon of gas has long served as a barometer of economic wellness for the American public. But understanding today’s energy policy landscape requires us to look far beyond this simple heuristic. As investors, we need to understand the key drivers motivating policy decisions and the market forces that constrain policy choices. The dynamics within U.S. energy politics are undergoing significant shifts, reminiscent of the transformations witnessed during the 1970s Arab oil crisis.

Presently, Republican presidential candidates find themselves navigating competing demands for greenhouse gas reduction while America stands on the brink of becoming a major global energy influencer. And some may only be heading towards a destination of increased fossil fuel production. Given the demand for more energy production in the short run, this policy resonates for many low-income to middle-income American voters whose lifestyles rise and fall with the price of gasoline and food (yes, it’s energy related).

This article will help you uncover the policy paths, with our continued focus on the Republican presidential primary contenders.

Former President Trump maintains his commanding lead in the race leveraging his policies towards conventional oil and gas to drive his agenda forward, but Nikki Haley continues to offer a competing vision of conservative policy for 2024 and beyond. Energy is no exception. As Trump doubles down on conventional oil and gas and dreams of reviving America’s sagging coal industry, Haley promises an “all-of-the-above” energy strategy which leaves room for renewable development. Do not mistake Haley for a lukewarm supporter of conventional energy products; this is the same candidate who vocally echoed the “drill, baby drill” mantra on the Republican debate stage. But Haley’s openness to clean energy technology and desire to cooperate on the global stage clearly set her apart from Trump.

Considering the significant and profound changes occurring in global energy geopolitics, these seemingly small nuances in policy direction will have outsized impacts on the winners and losers of the new energy future. In the 1970s, the Arab oil crisis set the stage for five decades of American policy focus on “energy security.” Today, several crises are converging to force another shift in America’s policy direction. From climate change to regional conflicts in Ukraine and Israel, the headwinds could easily wreak havoc on the global economy.

However, unlike the situation in the 1970s, American policymakers now find themselves in a different position as the world’s largest oil producer. This is due to ongoing benefits from the shale revolution and substantial funding approved by Congress for energy-related priorities. These factors will provide the next president with ample flexibility and options to act within the energy sector. The question is: What moves are they likely to make? Let’s dive in.

Setting the policy landscape: Ghosts of 1973?

Two critical developments are important to highlight before reviewing the candidates’ positions. Let’s start by rewinding the clock 50 years. In the aftermath of the 1973 Yom Kippur War, Arab nations eager to retaliate against the US and allies for supporting Israel found an easy weapon: oil. By halting all oil shipments from the Middle East to the US, Arab nations inflicted acute pain on the American economy. As images of “No Fuel” signs at gas stations became seared into America’s collective memory, US policymakers began to obsess over a concept known as “energy security.” In an effort to insulate the US from the vagaries of global energy markets, the federal government sought closer ties with Saudi Arabia, created the Strategic Petroleum Reserve, and banned the export of crude oil. The US would remain a net energy importer for many years, but energy security (or energy independence) became something of a holy grail.

It’s essential to note that this period also prompted a significant shift in American policy, emphasizing the need to secure domestic energy resources to shield the nation from geopolitical upheavals.

The dream was partially realized in 2019 when America became a net energy exporter for the first time. Donald Trump likes to credit the policies of his so-called “Trump Energy Revolution” for the state affairs, but the real driver of the transformation was good, old-fashioned private sector innovation. In the early 2000s, oil and gas producers made critical technological advances that enabled the extraction of fossil fuels from deposits found in shale rock formations. America’s oil and gas production exploded, increasing 42% between 2000 and 2019. Somewhat ironically, the abundance of cheap natural gas did more to displace coal demand in the US than environmental regulations ever could.

The focus on energy affordability and reliability – durable features of American energy politics since the Arab oil crisis – continues to underpin Republican policy and rhetoric today. At the same time, modern Republican candidates must also contend with societal demands for lower greenhouse emissions and energy sector innovation. The rise of shale production means that America’s energy situation is far less dire than in the 1970s, but the choices confronting policymakers are also much more complex. Below is a brief overview of the energy policy direction each candidate has laid out.

Donald Trump

Trump set a goal of “ensuring that America has the No. 1 lowest cost of energy of any industrial country anywhere on Earth.” This ambition aimed to leverage the nation’s resources for energy independence, prioritizing affordability and accessibility. The former president promises to achieve this goal by following the same energy policy approach from his previous term in the White House. During his last term, Trump’s policies were characterized by a relentless focus on fossil fuel energy sources (oil, gas, coal) and a total aversion to global climate politics. President Trump withdrew the United States from the Paris Accords, the global compact aimed at helping keep global warming below a target of 1.5 degrees Celsius from pre-industrial levels.

If elected for a second term, Trump aims to enable more oil, gas, and coal production by removing red tape and expanding fossil fuel exploration on public lands. He also wants to stop renewable power subsidies and halt other policy actions that “distort” energy markets, such as car emission standards. Finally, Trump notes a desire to reduce environmental litigation that delays energy production and infrastructure projects. During his last term, Trump was an ardent supporter of oil and gas pipelines in particular.

Trump also actively campaigns against the development of renewable energy and electric vehicles. He has criticized wind and solar power, where he voiced doubts about their reliability and cost-effectiveness. Instead, he strongly supported the expansion of traditional energy sources, expressing skepticism about government mandates and emissions standards for internal combustion engines. His administration focused less on utilizing federal land for renewable energy development and placed a greater emphasis on conventional oil and gas leases rather than promoting the advancement of new technological innovations.

How to Prepare: Businesses should prepare for a strong focus on traditional energy sources like oil, gas, and coal. Diversification into these areas and investments in technologies that support fossil fuel extraction and processing could be beneficial. Additionally, companies should anticipate reduced support for renewable energy initiatives.

Nikki Haley

Haley’s key campaign pledge is to pursue “an all-of-the-above energy plan that makes America energy dominant.” This involves a comprehensive plan designed to utilize different energy sources for the nation’s benefit. Like Trump, she wants to reduce the regulatory burdens on energy producers, help expand conventional oil and gas production, and make it easier for energy infrastructure projects to get off the ground.

In addition to these goals, she emphasizes the importance of fostering energy independence for the United States, aiming to minimize reliance on foreign energy sources. Haley shares Trump’s antipathy for green energy subsidies and clean energy production requirements. She largely echoes the former president’s concern about the negative impact of these policies on jobs and energy cost inflation. To help ease the impact of energy cost increases on consumers and buoy the domestic auto industry, Haley would seek to eliminate the federal gas tax.

Furthermore, while advocating for conventional oil and gas, Haley strongly advocates for continual innovation in the energy sector. She expresses a firm belief in continued energy innovation to make the sector “cleaner, safer, and more affordable for consumers.” She does not outline specific policy proposals aimed at supporting new energy technology, instead saying she wants the industry to decide on the optimal energy mix. However, in public appearances, she goes to great lengths to affirm her belief in the impacts of climate change and the promise of wind, solar, nuclear, and other emerging energy technology.

Finally, regarding international relations and energy geopolitics, Haley sees an opportunity to leverage energy policies to advance US interests in foreign policy. As Trump’s Ambassador to the United Nations, Haley implemented the president’s decision to withdraw from the Paris Accords. But there is little evidence that she would follow in Trump’s footsteps if she sat in the Oval Office. Instead, she would likely seek to build alliances with allied nations to isolate Iran and Russia, undermining their ability to generate revenue from oil and gas exports. She has also emphasized the need to bring China, India, and other large emitters in line with American environmental standards. This strategy includes advocating for global cooperation and commitment to environmental goals while promoting partnerships that encourage adherence to environmentally responsible practices.

How to Prepare: Haley’s “all-of-the-above” energy strategy suggests businesses should maintain a balanced investment portfolio in both conventional and renewable energy sources. Companies should also be ready for potential policy shifts that could enhance energy independence and global competitiveness.

Ron DeSantis

The centerpiece of Ron Desantis’ energy plan is a pledge to cut the price of gas to $2 per gallon by 2025. The headline-grabbing pledge is likely to resonate with primary voters in red states, but DeSantis differs little from Trump on the policy specifics.

On the domestic level, DeSantis wants to incentivize increased production of oil, gas, and coal; build more energy infrastructure, including nuclear and hydropower; and remove Biden Administration subsidies related to clean energy and electric vehicles. He also shares Trump’s concerns about an overbearing regulatory and legal environment negatively impacting energy production. One unique aspect of DeSantis’s domestic agenda includes a focus on securing the energy grid. DeSantis mentions cybersecurity and rare earth minerals specifically, which other Republican candidates do not include as specific priorities.

To fortify the energy grid, DeSantis plans to implement robust cybersecurity measures, recognizing the vulnerability of the current grid system. Additionally, his emphasis on rare earth minerals highlights his intent to address the scarcity of these crucial elements essential for various technological applications.

On the international stage, DeSantis promises to withdraw the US from international climate commitments and jettison “net-zero” greenhouse gas emissions targets. Like the other Republican candidates, he is also eager to reduce America’s dependence on foreign nations, particularly China.

How to Prepare: Businesses should expect policies similar to Trump’s, with a focus on traditional energy sources. Preparing for increased oil and gas production, while also considering investments in grid security and rare earth minerals, could be advantageous.

Chris Christie

If DeSantis aligns with Trump’s proposals, Chris Christie provides the same corollary for Haley. The former New Jersey governor proposes a pragmatic approach that emphasizes fossil fuels, nuclear, and renewable energy development. Christie supports measures that would expand increased oil and gas production, including building pipeline infrastructure and reducing regulations. Yet he also wants to incentivize technologies that can help curb greenhouse gas emissions, like carbon capture, utilization, and storage.

However, it’s important to note that Christie’s approach has evolved over time. While some reports indicate that Christie was slow to approve renewable energy projects during his time as the executive of New Jersey, his recent remarks and public comments reflect a shift in his perspective towards embracing new technology and renewable energy initiatives. Like his fellow candidates, Christie criticizes China for lax environmental standards and stresses that the US should not reduce emissions unilaterally.

How to Prepare: Prepare for a pragmatic approach that supports fossil fuels, nuclear, and renewable energy development. Anticipate policies that might incentivize technologies to curb greenhouse gas emissions, like carbon capture and storage.

Vivek Ramaswamy

Ramaswamy’s energy policy proposals are short on specifics, but he clearly shares the same zeal for fossil fuels as other Republican candidates. He has called fossil fuels “essential for human prosperity” and committed to embracing all conventional energy production if he becomes president. This includes supporting the continued use of coal, in addition to incentivizing more drilling and fracking, to produce as much domestic energy as possible.

Ramaswamy would not prioritize any measures to address climate change or reduce emissions. He grabbed headlines by calling climate change a “hoax” during the first Republican debate and would seek to “abandon the climate cult.” In subsequent remarks, Ramaswamy clarified that although he believes the climate may be warming, it is not an existential threat to humanity and government policy should focus on maximizing energy production at the lowest possible cost. For this reason, Ramaswamy is also a vocal supporter of nuclear power.

How to Prepare: Expect a strong emphasis on fossil fuels. Businesses should be ready for policies that may not prioritize climate change or renewable energy but could support nuclear power and conventional energy production.

Analysis

All of the Republican candidates share similar policy goals that reflect the energy security consensus honed in the aftermath of the Arab oil crisis. Although advertising their plans in distinct ways, all aim to deliver cheap, reliable energy for consumers and businesses. The candidates also largely agree that environmental regulations and government subsidies for “green” energy technology serve as major impediments to achieving their vision. The result is a remarkably similar approach to domestic production of conventional fossil fuel energy sources.

Each Republican plan calls for increased production of American oil and gas, while specifically targeting reductions in the regulatory burden faced by incumbent energy firms. For example, nearly every candidate decries the delays facing the construction of energy infrastructure such as pipelines. They also rail against President Biden and Democratic lawmakers for trying to use environmental standards and tax credits to incentivize the adoption of electric vehicles.

The Republican candidates start to diverge when faced with new and emerging policy choices that do not fit neatly into the traditional energy security narrative. Two fault lines are particularly important to understand as you evaluate future economic growth opportunities.

First, what role should America play in global energy politics? Energy and environmental politics have shifted significantly over the last 50 years. Just last month, nearly 200 parties at the COP28 United Nations climate conference in Dubai agreed to support the transition away from fossil fuel energy for the first time. This type of agreement would have been unthinkable even a decade ago. It may lack enforcement teeth, but the COP28 outcomes send a clear signal to energy companies and investors about the societal expectations for the future.

Trump, DeSantis, and Ramaswamy have made it clear that they will not countenance any type of international agreements or official net-zero commitments. If elected to the White House, all three would seek to withdraw US participation from global climate compacts expeditiously. Haley and Christie have not demonstrated the same level of vitriol to global climate politics. They frequently criticize large emitters like China and India, but their records and overall approach suggest a greater willingness to work within international institutions.

The disparate attitudes towards the United Nations also serve as a broader indicator of the candidates’ stances toward international cooperation and conflict on energy topics. Haley made global energy politics central to her plan, promising to partner with allies on sanctions and other measures to hamper the energy export capabilities of Russia and Iran. Both Haley and Christie acknowledge the role that energy can play in helping America achieve foreign policy goals, especially in light of Europe’s forced pivot away from Russian natural gas.

If one of the current energy headwinds turns into a full-blown energy crisis, the Haley/Christie predisposition towards international cooperation may help ensure that America continues to act as a reliable energy partner on the global stage. According to Wood Mackenzie, American firms have inked long-term supply agreements totaling more than 65 million tons per year of LNG over the last two years. During a crisis, it is easy to envision Trump or DeSantis seeking to curtail these or other American energy exports. After all, the US export ban on crude was only repealed in 2015. Any measures restricting US energy exports could easily reemerge under the guise of America First, aggravating US allies and energy customers during a crisis.

The second area of divergence concerns the overall attitude toward the deployment of renewable energy technology. While the capacity of wind, solar, and other renewables in the US has doubled in the last ten years, it still only makes up about 20% of the overall energy supply in America. President Biden and Democrats in Congress have sought to supercharge that figure through government spending. Funding included in the Inflation Reduction Act alone will increase the Department of Energy’s clean energy loan capacity by an eye-popping $100 billion. All Republican candidates have criticized these measures, which they see as profligate government spending. But that does not mean they approach the promise of renewable energy technology in the same way.

Trump, DeSantis, and Ramaswamy actively criticize the development of renewable energy and Democratic “mandates” to move toward electric vehicles. DeSantis claims that President Biden has “declared war” on the internal combustion engine. Trump notes Biden’s engine emission standards are “brutalizing” the automobile industry and will lead to the loss of over 100,000 auto manufacturing jobs. Ramaswamy, for his part, has referred to government support for green energy as a corrupt effort designed to control American society. The rhetoric seems to be impacting the perception of Republican primary voters to renewable and electric technologies, with one report finding that self-identified MAGA Republicans are more likely to oppose renewable energy development than moderate Republicans.

By contrast, Haley and Christie propose an energy policy approach that is inclusive of renewable energy. Neither explicitly supports government funding or policy directives for renewables and electric vehicles. But they are open to including all technologies within America’s energy mix, provided implementation is led by the private sector. The gentler posture toward renewables could lead a Haley or Christie administration to actually make use of the massive government funding available for renewable power projects in the US. Furthermore, both candidates have left the door open for future renewable energy sales pitches to Republican voters. While Trump, DeSantis, and Ramaswamy continue to emphasize the risks from renewables, they leave the mantle open for a Republican candidate willing to lean into the potential jobs and economic growth that clean energy technology could generate.

Finally, one glaring oversight found among nearly all candidates is a failure to detail the policy actions needed to secure America’s energy supply chains of the future. In my last article on trade policy, I mentioned the risks posed by China’s dominance of the critical mineral sector. This dominance has serious implications for America’s energy future, yet only DeSantis acknowledged them in his energy policy proposal.

DeSantis was also the only candidate to include cybersecurity as a key energy policy pillar. The vulnerability of critical American energy infrastructure to a cyber attack was laid bare in May 2021, when hackers shut down Colonial Pipeline’s operations for about five days. The attack caused shortages of gasoline and fuel across the US eastern seaboard, stoking consumer fears and spurring panic buying. National security and law enforcement agencies recognize the cybersecurity threats facing America’s energy grid. Yet the only Republican candidate prioritizing the issue is DeSantis. Unfortunately for him, neither these acknowledgements nor his retail politicking promise to lower the cost of gas to $2 per gallon will likely be enough to rescue his campaign.

Final Thoughts

The landscape of U.S. energy politics is going through a significant change, presenting a crucial moment for Republican presidential candidates. Some are trying to balance the need to reduce greenhouse gasses while positioning the United States as a global energy leader. Some are simply focusing on meeting the projected increases in energy demand by increasing fossil fuel production. These differing approaches signify a critical juncture in determining the future of America’s energy and will signal to energy producers how they should shape their future investments.

The decisions made by the future president will hold immense power, shaping not just the country’s energy situation but also influencing global energy dynamics. The complex relationship between fossil fuels and renewable energy, the delicate balance between national interests and international cooperation, and the urgency to secure energy resources for the future all converge at this pivotal moment.

As we deal with the complexities of energy policy, the choices made by the winning candidate will define America’s energy dominance and its impact on the world stage. The repercussions of these decisions will resound for years, shaping both the country’s energy trajectory and its role in global energy geopolitics. In this period of transformation, today’s decisions will echo through time, leaving a lasting legacy on America’s role in the ever-evolving energy narrative.

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