America’s golden age (25/01)

There have been quite a few interesting events to analyze this week, and below I list the most noteworthy news. Let’s get started:

• Donald Trump has begun his second term with a series of executive orders signaling dramatic shifts in several key areas, which we must analyze due to their significant market implications. He declared a national emergency at the border, allowing the Secretary of Defense to rapidly deploy military forces and redirect federal resources. Additionally, he reinstated the controversial “Remain in Mexico” policy, requiring asylum seekers to wait in Mexico while their cases are processed. This aims to alleviate pressure on U.S. immigration facilities and deter illegal crossings. The agricultural and construction sectors could face significant labor tensions, reigniting inflationary pressures that seemed to have subsided.

  On civil liberties, Trump issued an order eliminating government censorship, claiming to protect First Amendment rights. He also froze federal hiring, specifically targeting the IRS, and mandated the return of federal workers to their offices. In foreign policy, he suspended all foreign aid for 90 days to reassess alignment with his administration’s objectives.

  In energy, he declared a national energy emergency, reversing policies such as electric vehicle mandates and wind energy projects from the Biden era. He re-prioritized oil and gas as economic drivers, announced the U.S. withdrawal from the Paris Agreement, and halted the expansion of onshore and offshore wind projects, arguing that traditional energy sources are crucial for energy independence and growth.

  Among his most controversial measures, Trump established the Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, to combat excessive federal spending. He also dismantled Diversity, Equity, and Inclusion (DEI) programs and announced the U.S. withdrawal from the World Health Organization, criticizing its handling of health crises and alleged biases.

  This initial package of measures underscores Trump’s vision of prioritizing traditional energy, reducing government size, and focusing domestic and foreign policies on immediate U.S. interests, with significant impacts on the global political and economic landscape. In his own words, this marks the beginning of America’s golden age.

  

   

• In addition, Trump has launched a major initiative: a private investment of up to $500 billion to develop infrastructure for artificial intelligence (AI). This project, named Stargate, will be built in collaboration with OpenAI, SoftBank, and Oracle, who have already committed $100 billion for the initial phase, with the remaining investment planned over the next four years.

  According to SoftBank CEO Masayoshi Son and Oracle Chairman Larry Ellison, Stargate will focus on building 20 data centers, each exceeding 46,000 square meters in size. The first center is already under construction in Texas. These centers will not only accelerate AI development but are expected to generate over 100,000 jobs in the U.S. The project envisions using advanced AI in critical sectors, such as healthcare, where the technology will analyze electronic medical records and improve patient care.

  This announcement coincides with the repeal of Joe Biden’s executive orders on AI, which aimed to limit potential risks associated with these technologies. Instead, Trump has opted to facilitate industrial development, including the energy production needed for these centers. However, this expansion poses significant challenges in terms of energy consumption. With half of the country at risk of energy shortages over the next decade unless the nuclear program accelerates, the strain on natural gas could also be substantial, especially as new export capacity shifts the market balance from surplus to structural deficit.

• Automobile sales in Europe barely grew in 2024, reflecting a challenging environment for the automotive industry amid persistent inflation,high interest rates, and declining interest in electric vehicles (EVs). New vehicle registrations increased by only 0.9%, reaching 13 million units. Sales of fully electric cars dropped by 1.3%, reducing their market share to 15%, particularly following the removal of subsidies in key countries like Germany.

  European automakers face a perfect storm heading into 2025, with a combination of price pressures, loss of market share in China, stricter EU emissions regulations, tariff risks in the U.S. under Trump’s presidency, and weak demand.

  In Germany, the elimination of EV subsidies caused a sharp decline in electric vehicle sales, while early elections in February could shape the industry’s future. With the collapse of EV sales across Europe and mounting pressure to comply with stringent EU emissions regulations, automakers face significant strategic challenges. All signs point to a longer lifespan and higher terminal value for PGMs.

• South African President Cyril Ramaphosa has signed the controversial Expropriation Act with zero compensation, marking a significant shift in land policy in South Africa and potentially straining the relationship between the ANC and its partners in the national unity government, particularly the DA, which opposes this legislation and considers it a critical issue in its participation in government.

  This new law replaces the 1975 Expropriation Act, inherited from the pre-democratic era, and establishes a framework allowing state entities to expropriate land in the public interest under specific conditions. According to the Presidency’s statement, the law aims to “promote inclusion and equitable access to natural resources.” However, expropriations cannot be carried out arbitrarily or for reasons unrelated to the public interest, and authorities are required to negotiate with property owners on reasonable terms before proceeding.

  The signing of this legislation reflects a key resolution from the ANC’s 2017 congress, although previous attempts to collaborate with the EFF to advance this agenda in parliament were thwarted due to disagreements over the bill’s wording. The law also includes provisions for resolving disputes through mediation or courts, which could help mitigate potential legal conflicts arising from its implementation.

  This measure is expected to add further strain to an already dysfunctional sector in many cases, such as mining in the country.

• The global energy outlook projected by the EIA for 2025–2026 anticipates downward pressure on oil prices due to supply expansion outpacing demand growth. Brent crude is expected to average $74/b in 2025, an 8% decline compared to 2024, and continue its drop to $66/b in 2026. This decline reflects the impact of increased global production, driven by the dismantling of OPEC+ cuts and growth outside the cartel, although tensions persist due to new U.S. sanctions on Russia’s oil sector.

  

   

  In terms of production, the EIA forecasts global growth of 1.8 million b/d in 2025 and 1.5 million b/d in 2026, with a key contribution from the United States. U.S. output is projected to hit a record 13.5 million b/d this year, with the Permian Basin consolidating its leadership, accounting for over 50% of crude production. However, U.S. production growth will be more modest in 2026 due to price pressures limiting activity in other regions. Meanwhile, Canada remains a critical supplier of heavy crude, essential for U.S. refineries, as light WTI crude does not meet the demand for fuels like diesel or jet fuel.

  

   

  On the demand side, global growth will be moderate and led by non-OECD countries, especially in Asia. India is expected to drive expansion, although projected growth rates of 1.3 million b/d in 2025 and 1.1 million b/d in 2026 remain below pre-pandemic trends.

  

   

  Of course, for anyone following the oil market (or this publication), it’s clear that this is a far cry from reality, but understanding market assumptions is crucial for proper positioning.

  Separately, the Trump administration announced its intent to replenish the U.S. Strategic Petroleum Reserves (SPR), which have fallen to 394.4 million barrels, their lowest level since the 1980s, following massive withdrawals under the Biden administration to combat high fuel prices. Trump plans to “refill the reserves to the maximum” while promoting U.S. energy exports. This move aims to bolster the country’s energy security, though the challenge of replenishing the SPR amid declining prices and global competition will be significant.