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The News
US President Donald Trump used his first day in office to issue a suite of executive orders aimed at boosting fossil fuel production and exports, and restricting the development of clean energy.
Trump’s emergency declaration on energy could allow the administration to bypass bureaucratic obstacles in approving the construction of power plants and grid infrastructure. He re-opened Alaska’s Arctic National Wildlife Refuge and a broad swath of offshore areas for oil and gas development. He withdrew the US from the Paris Agreement and ordered a halt to all federal spending from the Inflation Reduction Act. He pulled back California’s authority to restrict sales of gas-engine cars, and ordered a review of “all agency actions that potentially burden the development of domestic energy resources… with particular attention to oil, natural gas, coal, hydropower, biofuels, critical minerals, and nuclear energy.” He lifted the Biden administration’s freeze on LNG export permits, and replaced it with a freeze on offshore wind leasing.
“We have something that no other manufacturing nation will ever have: the largest amount of oil and gas of any country on Earth,” Trump said during his inauguration speech. “And we are going to use it.”
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Tim’s view
Trump’s speech was heavy on expansionist undertones, with praise for the Gilded Age President William McKinley and a promise to “take back” the Panama Canal. His fixation on increasing oil and gas exports is an extension of that philosophy; fossil fuel production, according to Trump’s executive order, is required to “rebuild our nation’s economic and military security, which will deliver peace through strength.”
When Trump talks about energy “dominance,” it’s not just in the sense of dominating the production rankings, which the US already does, but also in the sense of making purchases of US fossil fuels a condition for favorable trade and political relations with the Trump administration. Want military aid, or to avoid tariffs? Buy US LNG. Buyers in Asia, Europe, and Ukraine have already stepped up purchases of US LNG since Trump was elected.
But Trump’s energy plans face some internal contradictions. His promises to lower consumer energy prices are directly at odds with the market conditions that usually incentivize greater oil and gas production. Oil prices fell yesterday at the prospect of expanded access to drilling in a market that is already oversupplied. That’s good for consumers, bad for oil companies. Other measures in Trump’s emerging playbook, such as rolling back vehicle emissions standards and refilling the Strategic Petroleum Reserve, would flip those conditions, helping oil companies at consumers’ expense.
In the gas market, meanwhile, higher LNG exports could drive US natural gas prices up, which is good for the industry but would cause domestic electricity prices to increase — at a moment when Trump is also rolling back energy efficiency standards on consumer products. Despite rapidly growing demand for electricity, US power prices fell in 2024 largely due to the availability of cheap natural gas. Renewables, which can be a powerful force for lowering electricity prices when coupled with batteries, appear unlikely to get much support, although they would be made more cost-competitive if gas prices increase.
Trump ordered a review of trade policies, but didn’t announce any new tariffs yet, so it’s unclear how trade with China — among the top buyers of US LNG — will change. But if the US walks back from its nascent domestic manufacturing plans for EVs and renewables, in favor of a more fossil-centric foreign policy, it will have much more catching up to do with China in four years.
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Room for Disagreement
In his Senate confirmation hearing last week, Trump’s nominee to lead the Energy Department, Chris Wright, argued that although he would take domestic price impacts into consideration when approving new LNG export terminals, he believes there is sufficient gas available to increase exports without raising domestic prices.
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The View From Europe
Many European officials are happy to open their ports for more US LNG, which is one of the few options available for cutting Russia out of their energy market and could help temper the rising power prices that are driving an exodus of heavy industries from the EU. But Europe, freshly burned by Russian President Vladimir Putin’s energy extortion, is already wary of Trump attempting similar maneuvers. “Whatever happens, we need to be extremely careful not to reproduce an overdependence on one country,” one diplomat told Politico. “Anything could happen because of [Trump’s] craziness.”
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Notable
- Whatever Trump does in office is unlikely to reverse the long-term decline of US emissions, analysts believe, as natural gas continues to take market share from coal in the power sector, Bloomberg reported. But the rate of improvement will likely slow, especially since overall power demand is rising.