Like millions of families across America, on Thanksgiving we gave thanks for being with friends and family, along with “…sunny days and that we’re all together.” I added a silent appreciation that left-wing climate extremists were resoundingly defeated on November 5th.

The market’s realization that the election had ushered in sensible, pro-American energy policies took the American Energy Independence Index +15% for the month, a return that in different circumstances would be satisfactory over a full year. The YTD performance is +52% the best of four consecutive up years.

President-elect Trump seems to be in the Oval Office already. His pronouncements from Mar-a-Lago on tariffs, illegal immigration and drugs carry more weight and press coverage than anything emanating from the White House.

In preparation for transactional foreign policy, Mexican President Claudia Sheinbaum asserted that migrant caravans are no longer reaching the US-Mexico border. Why is that only happening now?

European Central Bank chief Christine Lagarde has said the EU should embrace a “checkbook strategy” and increase imports of US LNG and defence equipment. They sorely need both. Seeing the fast response of foreign leaders to the election simply highlights how weakly the current Administration has promoted US interests.

It’s likely Europeans will be buyers of LNG next year anyway. Northwest Europe has endured colder than normal weather recently, and North Sea windspeeds have been inconveniently low. As a result, storage withdrawals have been higher than usual, although overall levels remain ample.

European natural gas futures markets reflect increased European demand. Buying more US LNG should be an easy way for the EU to deflect Trump’s promised tariffs.

UK power generation has relied on natural gas more than usual over the past month, given the calm, cold weather. The prospects for the cleanest hydrocarbon are diverging markedly from the outlook for crude oil, where its role in transportation is changing. The International Energy Agency (IEA) is little more than a renewables cheerleader and has long forecast an imminent peak in oil demand.

Greg Ebel, CEO of Enbridge, argues that we’re going through an energy transformation, not transition. On a podcast series called Energized: The Future of Energy he classifies the 19^th century as being about coal, the 20^th about crude oil and the 21^st about natural gas. North America’s biggest pipeline operator rejects climate orthodoxy that all hydrocarbons are going away, arguing instead that natural gas is a vital partner to increased reliance on intermittent solar and wind.

The UK is a case in point. Although windpower is on average their biggest source of electricity, roughly half the time natural gas provides the most.

Meanwhile China’s growing EV market is likely to dampen one source of demand growth for crude oil.  They recently reached a milestone in that half of new auto sales now run on batteries. This often fools people into thinking that China is making substantial progress in decarbonizing their economy, ignoring that their EVs, like China itself, run principally on coal. They’re regressing towards a 19^th century fuel because energy security is what drives policy in Beijing.

China’s energy deficit needs to close before they can take a more confrontational approach over Taiwan. It’s still some years away. Friends of mine with a military background, and therefore better placed to have an opinion, say their military isn’t yet ready.

But China’s heading in that direction, building up their military capability while reducing their dependence on imported energy. Increased power generation from coal and renewables helps because they’re both sourced domestically. This is why the Chinese government has pushed EV adoption.

Nonetheless, moderating crude imports from the biggest driver of demand growth is likely to weigh on prices and global consumption.

Although “drill baby, drill” is widely expected to have a limited impact on E&P behavior, some increased production is likely at the margin as the new administration opens up more public land for drilling. 90% of oil and gas production is on private land and so not much impacted by the White House. However, an improved regulatory environment will encourage some increase.

Barron’s recently wrote about the impact of AI on oil drilling in the Permian, where it’s lowering break evens and driving energy sector productivity higher than any other industry, delivering 60% more oil a day with 40% fewer workers over the past decade. This is bearish for oil prices although not for industry profits.

If we do see lower crude prices it will stimulate demand, delaying any potential peak in oil consumption.

Whichever way crude moves, midstream investors are unlikely to care. The sector has shown little connection with oil prices this year and there’s every reason to think that will continue to be the case.

We have two have funds that seek to profit from this environment:

Energy Mutual Fund

Energy ETF

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