Fossil fuels are back in favor with the new administration.
Fossil fuels are back in favor with the new administration.
The direction of executive orders will hopefully address infrastructure constraints.
Market forces drive investment in new projects, whether for oil and gas production or LNG.
Since January, the U.S. administration has put forth a series of executive actions—ranging from executive orders to tariff announcements—that clearly signal a new direction in domestic energy policy. This new approach favors growth in fossil fuels and electricity while scaling back the support that renewable energy had under the prior administration. Uncertainties remain in the specific implementation of these new policies, so we approach these actions in the same way that energy business leaders should: by considering the general direction set by the administration as well as the market and policy forces that will shape the final outcomes.
While fossil fuels are now back in play and wind and solar may be pushed to the sidelines, the administration’s goals of ensuring affordable, abundant energy will still require an ‘all-of-the-above’ energy approach.
Among a flurry of executive orders and actions, many are noteworthy for the energy ecosystem, including the following:
Fossil fuels are back in favor with the new administration, and the direction of its executive orders will hopefully work to resolve many of the infrastructure and permitting constraints impacting the energy sector. However, it’s important to recognize that market forces drive investment in new projects, whether for additional oil and gas production or LNG terminals.
Global markets have seen West Texas Intermediate oil prices fall by more than 25% from this year’s high in January of $80 per barrel to near $60 per barrel due to concerns of a global economic slowdown dampening demand. Meanwhile, OPEC+ has resumed production at higher-than-anticipated levels despite forecasted surpluses in 2025 and 2026. The lower price is good for consumers, but sustained oil prices near $60 per barrel are likely to keep production flat this year, and sustained prices near or below $55 will drive U.S. production cuts.
Demand growth remains strong, driven by increasing power demand, industrial demand and the need for more winter heating. Improved pipeline infrastructure to transport gas from high-production areas will improve gas production and project economics going forward.
Export capacity is poised to rapidly expand in the coming years from projects already under construction, from 15.5 Bcf/d (billion cubic feet per day) at the end of 2024 to 25.1 Bcf/d by the end of 2027, an increase of 62%. Between 22 Bcf/d of existing approved new capacity (unaffected by last year’s Department of Energy pause) and the current administration’s approval of additional capacity, the total authorized exports to date amount to over 49 Bcf/d, more than tripling current U.S. capacity.
The U.S. is seeing a surge in electricity demand growth—2%−3% annual growth nationally, with hot spots of 8% growth or more, compared to flat growth over the last 15 years. This growth is driven by increasing demand from data centers, industrial facilities, transportation and other electrification needs.
While nearly all power sources except wind and solar are preferred under administration policies, all (including wind and solar) will benefit from streamlining of permitting and other administrative processes that slow the approval of new electricity infrastructure. Wind is likely to see limited growth in the coming years, but solar will continue to see significant growth (despite being out of favor) due to its ability to be constructed within 12 to 18 months—faster than any other power source.
While the executive actions have clearly signaled the administration’s direction, significant uncertainties remain, including:
While fossil fuels are now back in play and wind and solar may be pushed to the sidelines, the administration’s goals of ensuring affordable, abundant energy will still require an “all-of-the-above” energy approach:
As businesses position themselves for the coming years, leadership teams will be well served to distinguish between the rhetoric and reality of how the administration accomplishes its stated goals.