Home Commodities JP Morgan Analysts Talk Trump 2.0 and Commodity Impact

JP Morgan Analysts Talk Trump 2.0 and Commodity Impact

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In a research note sent to Rigzone recently, analysts at J.P. Morgan looked at “key policies” that could change under a new Donald Trump administration, as well as “the impact on commodities if they were to come into play”.

“Under Trump 2.0, it is unlikely that Biden’s IRA [Inflation Reduction Act] law would be materially altered, given that 75 percent of investment in clean energy manufacturing pledged since passage is destined for states with Republican governors and 83 percent to Republican-held congressional districts,” the analysts stated in the note.

“Tax credit policy for clean electricity and large-scale renewable power production, along with investment incentives for carbon capture, nuclear, and hydrogen energy, as well as sustainable aviation fuel and biofuels are the least at-risk elements of the law,” they added.

The analysts highlighted in the note that Republican states are leaders in clean energy deployment, “attracting 80 percent of all the funding, with Georgia, Texas, and Oklahoma the main recipients”.

“Texas led the nation in 2023 for new solar installations, eclipsing California for the second time in the last three years, followed by Florida,” they added.

“Meanwhile, Republican-governed Texas, Oklahoma, and Iowa were among the top three states for wind installations,” they continued.

The analysts warned in the note, however, that a Trump administration would likely attempt to scale back the consumer elements of the IRA, “such as incentives for the purchase of electric vehicles and home heating”.

“Even then, a full legislative repeal of the IRA’s EV-related subsidies seems unlikely,” the analysts said in the note.

“Republican-held congressional districts account for 71 percent of the total investment received for clean vehicle and battery technologies, and Republican districts in states such as South Carolina, Georgia, Michigan, Nevada, Ohio, Indiana, and Tennessee are among the top for company commitments,” they added.

The analysts also stated in the research note that a second Trump administration would likely see a major realignment of federal energy policy via executive actions to lighten the regulatory burden on oil and gas companies.

“However, we see no structural changes in our expectations for both U.S. oil and natural gas production during the next presidential term, regardless of who sits in the White House,” they added.

The analysts said in the note that “Trump 2.0 would likely take a harder line on foreign policy” but added that “there are reasons to believe a renewed sanctions campaign on Iran or Venezuela will have little effect on their oil exports”.

“Similarly, under Trump 2.0, financial and military support for Ukraine would likely face greater challenges, yet it is unclear that under such a scenario, sanctions on Russia’s oil and gas sector will be fully lifted, bringing Russian oil supply back into the market,” they noted.

In the note, the J.P. Morgan analysts stated that, with six months to go until the elections, it is premature to call the outcome of the presidential race, along with control of the Senate, which they said is “shaping up to feature a tense rematch between President Joe Biden and his predecessor Donald Trump”.

“Past elections have sparked market gyrations, but this year the market has started pricing in the election substantially earlier than it has in the past,” they warned.

Kristian Coates Ulrichsen, a fellow for the Middle East at Rice University’s Baker Institute for Public Policy, and co-director of the Middle East Energy Roundtable, told Rigzone he thinks Trump has “a very strong chance of winning in November”.

Ulrichsen added, however, that “there are so many uncertainties stemming from his legal difficulties that it is far more difficult to predict the outcome of the election than it usually would be”.

The Baker Institute representative said a second Trump administration would likely be supportive of U.S. oil and gas projects, adding that “an early indication of that support would be its decision on whether to lift or continue the LNG pause”.

“Given Trump’s visceral dislike of initiatives associated with his political opponents, it’s likely he would dismantle any Biden-era decisions, such as the pause, just as he did Obama-era initiatives, such as the Paris Accords and the JCPOA,” Ulrichsen said.

To contact the author, email andreas.exarheas@rigzone.com

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