When Donald Trump assumed office in January 2017, one of his central policy pillars was to promote “American energy dominance.” His administration’s pro-energy agenda aimed to reduce regulatory hurdles, expand access to federal lands for drilling, and support fossil fuel industries as the backbone of U.S. economic strength. For investors, this sounded like a recipe for success in the energy sector, particularly for oil and gas companies. However, the reality of how these policies translated to stock market performance paints a more nuanced picture.
Trump’s Pro-Energy Policies: A Push for American Energy Dominance
The Trump administration’s energy policies were some of the most fossil-fuel-friendly in U.S. history. Key initiatives included:
- Deregulation:
- Rolled back numerous environmental regulations, such as methane emission standards and restrictions on coal-fired power plants, reducing compliance costs for energy companies.
- Fast-tracked permits for drilling and pipeline construction, enabling companies to expand operations more quickly.
- Expansion of Federal Land Leasing:
- Opened up vast tracts of federal lands and offshore areas to oil and gas drilling, including areas previously off-limits, such as the Arctic National Wildlife Refuge (ANWR).
- Reduced royalty rates for drilling on federal lands to incentivize production.
- Support for Energy Exports:
- Promoted liquefied natural gas (LNG) exports by easing restrictions and negotiating trade deals to open new markets, particularly in Europe and Asia.
These policies created a favorable operating environment for oil and gas companies, leading many to expect robust financial performance and rising stock prices. Yet, contrary to expectations, the stock prices of many U.S. energy companies declined during Trump’s first term. To showcase this fact, we plotted SPY, an index that tracks the S&P 500, versus IYE, an index that tracks US energy companies. This comparison shows the S&P outperformed US energy even before the COVID-19 pandemic sell-off.
Why Did U.S. Energy Stock Prices Fall During Trump’s First Term?
Despite the pro-energy stance, several factors contributed to falling stock prices for U.S. oil and gas companies between 2017 and 2021:
- Oil Price Volatility:
- Oil prices saw significant fluctuations during Trump’s tenure. While prices initially rose after OPEC production cuts in early 2017, the U.S.-China trade war and fears of a global economic slowdown dampened demand, leading to price volatility. Oil prices ranged from lows of around $40 per barrel to highs of nearly $75 per barrel.
- The COVID-19 pandemic in 2020 caused an unprecedented collapse in oil demand, briefly sending prices into negative territory.
- Oversupply Concerns:
- Trump’s policies encouraged rapid production growth, particularly in the U.S. shale sector. U.S. crude oil production rose significantly, increasing from approximately 8.8 million barrels per day in January 2017 to over 13 million barrels per day by early 2020—a record high. The increase in output contributed to a global oil glut, which pressured prices downward.
- Rising production from OPEC+ countries, including Russia, further exacerbated oversupply concerns.
- Investor Sentiment and ESG Trends:
- Growing environmental, social, and governance (ESG) concerns led many institutional investors to divest from fossil fuel companies, reducing demand for their stocks. Companies like NextEra Energy and Enphase Energy performed particularly well, with their stock prices significantly outpacing broader market indices.
- Renewable energy stocks gained favor during this period, further diverting investment away from traditional oil and gas companies. U.S. renewable energy production grew by approximately 30%, with wind and solar power contributing the largest increases, adding more than 100 terawatt-hours of additional capacity between 2017 and 2020.
- Financial Discipline Issues:
- Some U.S. shale companies were criticized for prioritizing production growth over profitability. High debt levels and inefficient capital allocation made these companies less attractive to investors. For example, Chesapeake Energy pursued aggressive drilling campaigns, incurring massive debt, which ultimately led to its 2020 bankruptcy. Similarly, Occidental Petroleum faced heavy criticism for its $55 billion acquisition of Anadarko Petroleum, which increased its debt burden and strained its balance sheet.
As a result, even with a favorable policy environment, the energy sector underperformed compared to broader market indices during Trump’s first administration.
How 2025 Differs from Trump’s First Term
Fast-forward to today, and the energy landscape has changed significantly. Several factors distinguish the current environment from that of 2017–2021:
- Post-Pandemic Recovery:
- Global energy demand has rebounded strongly as economies recover from the COVID-19 pandemic, driving higher oil and gas prices. As of 2025, global oil demand has surpassed 101 million barrels per day, compared to around 99 million barrels per day in 2019. On the supply side, global oil production has increased to approximately 100.5 million barrels per day in 2025, up from about 95 million barrels per day in 2019. While the gap between supply and demand appears narrow, even a shortfall of half a million barrels per day can create upward pressure on prices, especially in a tight market where spare production capacity is limited and geopolitical uncertainties persist.
- Geopolitical Dynamics:
- The Russia-Ukraine war has disrupted global energy markets, increasing demand for U.S. liquefied natural gas (LNG) exports to Europe. U.S. LNG exports grew from about 5 billion cubic feet per day (Bcf/d) in 2017 to over 12 Bcf/d in 2022, with projections indicating further increases as Europe seeks to diversify away from Russian gas.
- Renewable Energy Expansion:
- The clean energy transition has accelerated, with solar, wind, and battery storage technologies becoming increasingly competitive with fossil fuels. Between 2017 and 2022, U.S. renewable energy capacity increased by over 100 gigawatts, with companies like NextEra Energy and Tesla driving growth in wind, solar, and energy storage. Government policies, including the Inflation Reduction Act, are expected to spur an additional $400 billion in renewable energy investments by 2030.
- Improved Financial Discipline:
- U.S. shale companies have focused on improving balance sheets, reducing debt, and returning capital to shareholders through dividends and buybacks, making them more attractive to investors. For example, Devon Energy and Pioneer Natural Resources have introduced variable dividend models that tie payouts directly to free cash flow, gaining significant investor interest.
Factors That Could Drive Stock Prices Higher
- Sustained High Oil and Gas Prices:
- Strong global demand and geopolitical disruptions could keep prices elevated, boosting revenues and profits for U.S. energy companies.
- Export Opportunities:
- Growing LNG exports to Europe and Asia present a significant revenue growth opportunity for U.S. producers.
- Pro-Fossil Fuel Policies:
- A renewed focus on deregulation and expanded drilling under a second Trump term could lower costs and increase production capacity.
Factors That Could Drive Stock Prices Lower
- Oversupply Risks:
- Rapid production growth spurred by pro-energy policies could lead to another oversupply situation, driving prices down.
- Investor Shift to Renewables:
- Continued growth in ESG investing and renewable energy adoption could divert capital away from fossil fuel companies.
- Economic Slowdown:
- A global economic downturn could weaken energy demand, negatively impacting prices and revenues.
Conclusion: A Complex Relationship Between Policy and Stock Performance
Donald Trump’s pro-energy policies have been instrumental in promoting U.S. energy independence and economic stability. However, the relationship between these policies and energy company stock prices is far from straightforward. While policies that encourage production and reduce costs can benefit companies in the short term, broader market dynamics, such as global demand, price volatility, and investor sentiment, play a critical role in determining stock performance.
As the energy industry navigates the dual challenges of meeting current demand while transitioning to a low-carbon future, investors must weigh the benefits of pro-fossil fuel policies against the risks of oversupply, price volatility, and shifting market preferences. In the end, while Trump’s energy agenda may boost U.S. energy production, its impact on stock prices will depend on how well companies adapt to an increasingly complex and competitive global energy landscape.
