Policy Positioning for Stability Amid Trump-Era Volatility

The North American region is a powerhouse of opportunities in the energy sector. As of April 2024, EICDataStream is tracking over 2,600 projects with a total capital expenditure (CAPEX) exceeding US$2 trillion. Oil and gas and conventional power account for 52% of this investment, while renewables, energy storage, hydrogen, and carbon capture and storage (CCS) represent the remaining 48%. 

The United States is the clear leader in project announcements, showcasing over US$1.5 trillion in CAPEX across 2,175 projects in all sectors. In January 2025, the beginning of President Donald Trump’s second term brought significant changes to the US energy landscape, affecting oil and gas sectors, renewable energy initiatives, and policy, and posing challenges to the United States-Mexico-Canada Agreement (USMCA) – one of the largest trade blocs in the world.

What do these developments mean for the US energy sector and the overall health of the USMCA concerning energy? A careful assessment is needed.

Impact on Oil and Gas and Renewables

The administration has prioritized increasing domestic oil and gas production through a "drill, baby, drill" ideology. Executive orders have relaxed environmental regulations and opened federal lands and waters for fossil fuel extraction, aiming to boost energy independence and position the United States as a top global exporter of liquefied natural gas (LNG). However, industry leaders warn that higher production could lead to market oversupply, negatively affecting prices and stock values. Additionally, aging oil fields and a plateau in global gasoline demand suggest that simply ramping up production may not yield the desired economic benefits. 

At the same time, the Trump administration has markedly shifted focus away from cleantech initiatives, withdrawing the United States from the Paris Agreement, halting federal funding for clean energy projects, and imposing tariffs on key imports critical to renewable energy infrastructure. The result is absolute uncertainty, creating a domino effect that flows to project delays, financial losses for major renewable energy players, and the beginnings of a renewable energy operator/developer US market exodus.

Energy Policy and Regulatory Environment

There will be winners and losers across the energy value chain as the administration’s focus will create a complex landscape of opportunities and challenges. The current Trump energy policy framework emphasizes deregulation and support for traditional energy projects, while protecting domestic players.  

Oil and gas companies are poised to benefit from deregulation, expanded drilling rights, and policies favoring increased production. With the administration's focus on LNG and natural gas and a push toward nuclear energy, these sectors may see significant growth around exports (natural gas) and policy initiatives driving a push toward nuclear new builds.

Due to reduced federal support, regulatory hurdles, and financial uncertainty, the growth of renewable energy, particularly solar and wind, is expected to be slow, with potential losses. An executive order halting the disbursement of funds from the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act further complicates the situation, especially with Congressional Bill H.R. 191 to repeal the IRA. This funding pause has dampened investments in renewable energy projects, leading companies to reassess their commitments amid ongoing policy ambiguities.

Furthermore, executive-ordered tariffs on imports from key trading partners such as China, and the potential for retaliatory tariffs upon USMCA members Mexico and Canada, will further impact the supply chain bottlenecks, which are still recovering from the COVID pandemic. 

Although the intent is to protect US domestic industries, an estimated US$233 billion in tariffs will be transferred to US businesses and consumers.  Considering continued geopolitical trade issues to come, further supply chain disruptions may cripple small to medium-sized energy supply chain companies. 

To put this into further context, Trump’s extensive tariffs on Chinese goods would greatly impact US energy manufacturers across oil and gas (specifically pipelines and rigs), renewables, battery storage, and electrical infrastructure suppliers.  Higher costs for components and materials originating from China would squeeze manufacturers’ margins. In turn, manufacturers would have to raise their prices to offset the costs of these tariffs, becoming less competitive internationally.  Chinese tariffs will also impact investment as these policy shifts create risk, and risk tends to delay investment.

Steps to Unlock America’s True Energy Potential

To provide some context, the US Energy Information Administration (EIA) projects that power demand in the United States will rise by approximately 100 billion kilowatt-hours this year. Given the current administration's emphasis on traditional energy sources, there may be an oversupply of oil and natural gas, which would also exacerbate environmental issues. Furthermore, after a decade of decline, coal demand is experiencing a resurgence due to increasing natural gas prices driven by liquefied natural gas (LNG) exports. This trend represents significant setbacks in the journey toward achieving net-zero emissions.

As the North American energy landscape continues to evolve, it is crucial to not only draw lessons from effective energy policies around the world but also to consider what is most practical – balancing the need for affordable, reliable, and secure energy sources with the urgent imperative to address the looming climate crisis. Potential policy alternatives and recommendations could include:

Policy Stability: Consistent long-term energy policies create a reliable framework for all energy stakeholders, regardless of their sector. This fosters investor confidence, encourages innovation, and promotes the development of energy infrastructure. Additionally, streamlined regulatory processes, such as simplifying permitting and approval procedures, help reduce delays and lower costs.

Diversified Bankable Energies: Investing in oil and gas, renewables, and energy transition technologies, such as hydrogen and carbon capture and storage (CCS), improves energy security, reliability, and affordability.

Infrastructure Modernization: Given the increasing frequency and severity of weather events, it is essential to enhance the national grid and its supporting infrastructure to support a wider range of energy sources and to strengthen resilience against potential disruptions.

Research and Development: R&D investments are essential for advancing energy technologies across various sectors and can establish the region as a global leader in energy innovation.

Collaboration and Community Engagement: Collaboration throughout the energy value chain is essential. It must involve the operator or developer, contractors, OEMs, the broader supply chain, local communities, all levels of government, technology innovators, and academia. Engaging without considering all stakeholders is ineffective.

Green Bridges the Gaps: Natural gas is a key component in the transition to cleaner energy. As a lower-carbon alternative to coal and oil, it provides reliable baseload and peak power, supports hydrogen production, and enables near-zero emissions power through carbon capture and storage (CCS). Additionally, renewable technologies like wind, solar, and CCS enhance energy security amid fluctuating oil and gas demand. The established energy supply chain has the expertise to address challenges in this transition. By incentivizing investments and fostering public-private partnerships (PPPs), we can effectively develop and implement new energy solutions.  

USMCA Renewal:  Renewal negotiations for the region offer a prime opportunity to establish a North American all-energy powerhouse, led by the United States. This initiative aims to strengthen the energy supply chain, enhance resilience, and boost global competitiveness. Key benefits may include the creation of manufacturing jobs, improved cross-border transmission infrastructure, increased foreign direct investment in energy technologies, and reduced reliance on Chinese imports.

By implementing these suggested policy strategies, the United States can maximize its energy potential, promoting economic growth, energy independence, and environmental sustainability. A well-reasoned approach will bring certainty across the region, and it is this certainty that will produce significant results.