TRUMP UNLEASHING AMERICAN ENERGY
On January 20, 2025, President Trump issued an executive order declaring a “national energy emergency.” This move aims to tackle what the administration calls “inadequate energy supply and infrastructure,” which they believe has led to higher energy prices for Americans and poses a threat to the nation’s economic and national security. We wholeheartedly agree that the U.S. should optimize utilization of its natural resources (read fossil fuels)—especially its abundant supply of natural gas. Natural gas is not only affordable and reliable but also burns cleaner than coal. The burning of natural gas instead of coal is the largest single factor for the U.S.’ success in reducing carbon emissions, according to the Energy Information Administration (EIA). Clearly, renewables have also played a meaningful role and are the fastest source of growing electricity generation.
The Trump administration is visibly taking steps to roll back the previous administration’s energy policies, such as limiting drilling on federal lands, delaying permits for liquefied natural gas (LNG) exports, and enforcing stricter environmental regulations on building new natural gas and coal-fired power plants.
By contrast, the Inflation Reduction Act passed in 2022 prioritized renewable energy (like wind and solar) and nuclear power—which the Trump administration also supports. (Please see the August 2022 Market Commentary: The IRA is Good for Both Traditional and Clean Energy). We have long argued that an “all of the above” approach to energy is required to achieve goals of reducing greenhouse gas emissions, ensuring energy security (which equates to national security), and promoting economic growth. Aspirational environmental policies that ignore pragmatic realities lead to inflation and poor allocation of resources, in our view.
WHAT TRUMP’S ENERGY POLICIES MEAN FOR THE U.S.
The bottom line is that President Trump’s directives and announcements issued to transform energy are positive for the energy sector, especially the easing of environmental policies and permit reform.
To get the full picture, here are some key facts to keep in mind:
1. The U.S. is already energy independent and energy dominant, but yes, the U.S. can even do more to exploit our natural resources.
o Record-breaking production: The U.S. is the world’s largest producer of oil, natural gas, and natural gas liquids (like ethane, propane, and butane).
o Global leadership in exports: The U.S. is also the top exporter of LNG and natural gas liquids (NGLs).
o Reserves ranking: Despite its production dominance, the U.S. ranks 10th in oil reserves and 4th in natural gas reserves globally.
2. Even though the U.S. exports more petroleum (crude oil + petroleum products) than it imports overall, it still brings in foreign crude oil:
o Refinery compatibility: Some U.S. refineries are designed to process heavier, sour crude oil, which is less common in domestic production. Most U.S. oil is lighter, sweeter crude, so importing heavier grades is necessary for efficient refining.
o Key import sources: In 2024, about 60% of U.S. oil imports came from Canada, while 7% came from Mexico—two major suppliers of the heavier crude oil that U.S. refineries rely on.
POTENTIAL IMPACT OF THE TRUMP ADMINISTRATION’S ENERGY INITIATIVES
DOMESTIC ENERGY INFRASTRUCTURE DEVELOPMENT (POSITIVE)
President Trump’s focus on permitting reform should gain momentum and support capital investments in the U.S. to improve and develop energy infrastructure, all else being equal. A key example is his decision to lift the Department of Energy’s pause on LNG export license approvals, which could accelerate project timelines.
The elimination of red tape should benefit midstream companies, which is an overweight sector in SAM’s portfolio strategies and which we believe can once again outperform this year. (Please see January 2025 Market Commentary: Midstream Companies Have Longer Runway for Sustained Earnings Growth). Notably, many large-cap midstream companies announced higher capital expenditures for 2025 during fourth quarter earnings calls (e.g., EPD, ETP, KMI, MPLX, TRGP). The increase in capital expenditures is primarily to address continued growth in Permian natural gas and NGLs production, expand export capacity for NGLs, and meet growing demand for natural gas. Generally, investors rewarded the midstream with higher stock prices recognizing that attractive project returns justify higher capital expenditures that eventually translate into higher earnings.
Interestingly, despite the expected increase in spending, the EIA anticipates U.S. energy expenditures as a share of GDP to remain relatively stable over the next two years.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2025
FOSSIL FUELS EXPLORATION AND PRODUCTION IN THE U.S. (NEUTRAL)
Despite President Trumps’ “drill baby drill’ mantra and ease of restrictions on Federal Lands, E&P companies are opting to maintain capital/financial discipline and see no need to accelerate their drilling plans as communicated by management teams on Q4 earnings calls.
EQT Corp. (NYSE-EQT) said on its earnings call that it will move from maintenance production to growth production only when there is evidence of sustainable demand growth (e.g., not higher demand due to colder than normal winter weather) as well as higher prices.
The growth in natural gas supply currently is primarily coming from natural gas associated with higher oil production from the Permian Basin, not increased drilling for natural gas.
As illustrated by the charts below, the EIA forecasts U.S. crude oil production to grow by ~400,000 Bbls/d in 2025 to 13.6 MMbbls/d and by just ~140,000 barrels/d in 2026. Natural gas production grows modestly to 104.6 Bcf/d in 2025 from 103.1 and more robustly in 2026 to 107.3 Bcf/d.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2025
DOMESTIC DEMAND FOR FOSSIL FUELS (POSITIVE)
Lifting the LNG export license pause is likely to boost long-term demand for U.S. natural gas. The U.S. already dominates the global LNG market, with ~16 Bcf/d of nameplate capacity currently in service and ~13 Bcf/d of additional capacity being constructed or pending FID. This expansion further solidifies the U.S. as a key supplier of natural gas worldwide.
Note: the U.S. only first began to export LNG in 2016. LNG exports in 2024 accounted for ~12% of U.S. production.
FOSSIL FUEL PRICES IN THE U.S. (MIXED)
Several Trump administration policies could push oil and gas prices in opposite directions:
Upward pressure on prices:
• Tariffs on energy imports: A 10% tariff on Canadian energy imports (effective next month) could raise U.S. oil prices, especially in the Midwest, where refineries rely on heavy Canadian crude. Canada accounts for ~60% of U.S. oil imports (~6.6 million barrels/day).
• Stricter sanctions on Iran: If Trump enforces tougher sanctions, it could reduce global oil supply, leading to higher prices—though OPEC’s response remains an unpredictable factor.
Downward pressure on prices:
• Ending the Russia-Ukraine war: If successful, this could ease restrictions on Russian energy exports, reducing global demand for U.S. exports like LNG—potentially lowering domestic oil and gas prices.
EIA outlook: Despite these competing factors, the EIA expects WTI crude oil to stay above $60 per barrel and Henry Hub natural gas to remain above $4 per MMBtu through 2026. See charts below for details.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2025, CME Group, Bloomberg, L.P., and Refinitiv an LSEG Business
Note: Confidence interval derived from options market information for the five trading days ending February 6, 2025. Intervals not calculated for months with sparse trading in near-the-money options contracts.
DOMESTIC CLEAN ENERGY/RENEWABLES INVESTMENTS AND DEVELOPMENT (NEGATIVE)
Trump’s withdrawal from the Paris Agreement signals a reversal of U.S. climate commitments. While ongoing projects are unlikely to be affected, the pause on clean energy funding under the Inflation Reduction Act could jeopardize new projects—especially those in early development stages. Offshore wind projects under federal jurisdiction face greater uncertainty while onshore ones on private land are less likely to be affected.
JANUARY REVIEW: ENERGY DELIVERS SOLID PERFORMANCE
The rundown:
In January, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 4.4% compared to 2.8% for the S&P 500 and 2.4% for its customized benchmark.
In January, SAM’s Energy Transition Portfolio generated a return (net of fees) of 2.2% versus 1.5% for its customized benchmark.
SAM’s portfolios are more heavily weighted in Midstream, which outperformed the clean energy in January but underperformed relative to utilities.
For the month, Midstream delivered a total return of 2.8% as measured by the AMNAX.
Utilities and the clean energy sector outperformed and underperformed, respectively, the overall market in January. The sectors generated a total return of 3.6% and 0.04% in January as measured by the Philadelphia Stock Exchange Utility Index (XUTY) and the S&P Global Clean Energy Index (SPGTCLTR), respectively.
In January, only one out of eleven sectors in the S&P 500 reported a negative total return with communication services as the best performer and information technology as the worst. Energy delivered a 2.1% monthly total return. January month-end WTI crude oil and Henry Hub natural gas prices were $72.84 Bbl and $2.93 per MMBtu, up ~1% and down ~14%, respectively, from last month.
RESULTS: SINCE INCEPTION & ONE YEAR
SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 140.3% and 49.7% for the periods since 11/10/20 inception and 1-year, respectively. This compares to a total return of 120.3% and 31.4%, respectively, for its customized benchmark and 81.6% and 26.4%, respectively, for the S&P 500 as of 1/31/25.
SAM’s Energy Transition Portfolio generated a return (net of fees) of 26.4% and 31.9% for the periods since 4/29/21 inception and 1-year, respectively. This compares to a total return of 21.9% and 13.0%, respectively, for its customized benchmark and 51.8% and 26.4%, respectively, for the S&P 500 as of 1/31/25.
2025 Year-to-Date Total Return
Source: Bloomberg, NASDAQ and S&P Global
Sam Partners’ Infrastructure Income and Energy Transition Strategies seek to provide sustainable income and growth with capital preservation. This is accomplished by investing in a concentrated portfolio of high-quality midstream energy companies, utilities and clean energy companies that are well positioned to participate in the energy transition to a net zero carbon future. A diversified approach to investments across these sectors should optimize risk-adjusted returns, in our view. Our Infrastructure Income Strategy offers investors a current yield of ~4.0% and growth potential of ~5-7%; while the Energy Transition Strategy that is more heavily weighted with clean energy stocks and aligns with favorable ESG ratings, offers investors a current yield of ~3.5%. In a world searching for yield, we believe these Strategies offer a compelling value proposition.
IMPORTANT DISCLOSURES
Siegel Asset Management Partners is a registered investment adviser located in Plainview, New York. The views expressed are those of Siegel Asset Management Partners and are not intended as investment advice or recommendation. This material is presented solely for informational purposes, and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness, or reliability. All information is current as of the date of this material and is subject to change without notice. Third-party economic, market or security estimates or forecasts discussed herein may or may not be realized and no opinion or representation is being given regarding such estimates or forecasts. Certain products and services may not be available in all jurisdictions or to all client types. Unless otherwise indicated, Siegel Asset Management Partners' returns reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.
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