In this clip from Industry Focus: Energy, Motley Fool analysts Sean O'Reilly and Taylor Muckerman talk about what changes Trump has proposed for the oil, coal, and renewable energy industries, and which of them might not pan out. Also, they explain why the market bounced around so much on the night before and days following election night.
A full transcript follows the video.
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This podcast was recorded on Nov. 10, 2016.
Sean O'Reilly: Donald J Trump, president-elect of the United States. Huge surprise win. Very different energy policies, and thoughts on the energy and industrial sector between him and his opponent...
Taylor Muckerman: Yes, indeed.
O'Reilly: ...Secretary Hillary Clinton. First and foremost, I couldn't help but notice that a lot of oil and industrial stocks went up a bunch yesterday.
Muckerman: They did.
O'Reilly: Again, that was surprising because overnight futures in the stock market dropped. Very surprising 48 hours.
Muckerman: Yeah, at the limit, they were down 5% after-hours, and then opened slightly up. I just think, all the money sifted out, exchanged hands as it needed to before the market opened and uncertainty evaporated.
O'Reilly: I'm actually on his website right now, and we've been covering it on Fool.com a decent amount over the last few months. Broadly, what should investors in the energy and industrial space expect from a Trump presidency?
Muckerman: More oil, more gas, more coal. At least, that's what he's saying. Whether or not it actually happens, that's a different story. I could see more oil and more gas, but...
O'Reilly: The coal is trickier.
Muckerman: I'm still very dubious on any long-term future for coal. You can try to stimulate more production, but where's the demand?
O'Reilly: Even anecdotally, power producers in the United States have been shifting away from coal for years.
O'Reilly: And Donald Trump cannot change that.
Muckerman: Yeah, I would be highly skeptical of a utility that has shuttered a coal plant, in favor of natural gas, especially with natural gas being fairly cheap...
O'Reilly: It's incredibly cheap.
Muckerman: Yeah. So, I find it very difficult to believe that you're going to see the demand for coal, at least in the United States, run back up. China's already been forgoing it for over a year now, ahead of schedule to reduce their reliance on coal. Europe, very much reducing their imports of coal, as well. So, yeah, sure, stimulate supply. But companies in a capitalistic environment are not going to produce if there's no one buying it.
O'Reilly: Right. It seems like the rise of energy stocks yesterday, it was related more to having a friend in the White House.
Muckerman: Yeah, fair.
O'Reilly: Oil was down a little bit yesterday. In fact, it's down a little bit today.
Muckerman: Probably because people were thinking, "Oh crap, they're going to start producing a ton, they're going to free up federal lands for fracking, they're going to free up more offshore oil, they're going to reintroduce the Keystone National Pipeline, potentially."
O'Reilly: Oh, he said that?
Muckerman: Before he was elected, he did say, "If I am, I'm going to suggest that TransCanada [(TRP -0.92%)] reapply for the northern leg of the TransCanada Keystone XL pipeline." [Editor's note: A press highlights package, distributed before Trump's speech in Detroit on Aug. 8, included, "Ask TransCanada to renew its permit application for the Keystone pipeline." ] The southern leg, from Cushing to the Gulf, is already there. But they're missing that leg to get Canadian oil sands oil to Cushing, which was the big hang-up with the Obama administration.
O'Reilly: Regarding the Obama administration, what do we know factually about...
Muckerman: Facts, do we really have to talk about facts?
O'Reilly: Just the facts, sir. What was that show? Dragnet?
Muckerman: I think so. Before my time.
O'Reilly: Bottom line, the oil industry, say what you want, did reasonably well under the Obama administration.
Muckerman: Yeah, if you look at it... if you look at the jobs that were created under him, if you strip out oil and gas jobs, you're left with net almost zero, if not negative jobs created. The oil and gas industry thrived, maybe not because of him...
O'Reilly: Probably more because of technological advances.
Muckerman: Right. There was a perfect storm for oil and gas in the United States to ramp up. So, I wouldn't give more than 50% credit to President Obama.
O'Reilly: So, how much restriction did he place on land usage?
Muckerman: You can't use federal land, for the most part. There [are] some ways you can apply right now, I believe. But I don't know all the ins and outs. But it was severely restricted. And there was no fracking on public federal land.
O'Reilly: It's on Donald Trump's website, here, it says, "open onshore and offshore leasing on federal lands, eliminate moratorium on coal leasing, and open shale energy deposits," which I assume we've been doing... anyway. He also says here, "Encourage the use of natural gas and other American energy resources that will both reduce emissions but also reduce the price of energy and increase our economic output."
Muckerman: That's basically a hedge of what he's saying. "I'll support this, but use whatever you want."
O'Reilly: Right. OK.
Muckerman: Which, again, companies are ramping up natural gas production. You're going to keep the prices subdued, competitive with coal, if not more advantageous.