“Seismic” blue wave triggers fall in oil prices, energy stocks and chances of authorizing reform

Even as Wall Street celebrated the expected gridlock of a splintered Congress and White House — the Dow Jones Industrial Average rose 3% on Wednesday — most energy companies moved in the opposite direction, particularly in states like Texas that recorded the most shocking Democratic victories.

The other potential loser is bipartisan legislation aimed at speeding up the construction of energy projects — and fueling the AI ​​boom — that would benefit both renewable energy and oil and gas pipelines. Anti-fossil fuel Democrats are now potentially motivated to adopt tougher negotiating tactics. Analysts at TD Cowen reduced their forecast for passage of the bipartisan American Affordability and Jobs Act (BAAJA) from 40% to 25% during the lame duck session preceding the swearing-in of the new Congress.

Charles Hua, executive director of the nonprofit PowerLines, said the “seismic” blue wave from Congress to the public utility commission gubernatorial elections was a referendum on rising utility bills, gasoline costs and inflationary ripple effects throughout the economy.

“You’re only going to get such seismicity in policy outcomes if something is fundamentally unstable or unstable, and I think one of the main manifestations of that has really been energy costs,” Hua said. Fortune.

In addition to voter dissatisfaction with the war in Iran and fuel prices, there have been more than 40 local ballot measures aimed at restricting or regulating data centers. All but one – in North Dakota – were successful. “It’s a staggering statistic,” Hua said.

When it comes to Wall Street’s performance, there have been clear winners and losers among utilities and independent power producers.

NRG Energy and Vistra, which are developing gas-fired power generation in Texas to help fuel the AI ​​boom, saw their stock values ​​fall precipitously by 12% and 15%, respectively. Gas turbine maker GE Vernova fell 10%.

Analyst Julien Dumoulin-Smith of Jefferies specifically highlighted the “Texas shock,” noting that “the most notable surprise is the size of Texas’ Democratic vote, jeopardizing data center development prospects.”

Texas-based Tesla and SpaceX leader Elon Musk, after unsuccessfully spending hundreds of millions on Republican candidates, posted on X: “Data centers in space look pretty attractive right now.”

On the other hand, public services operating in Florida, which remained Republican, were rewarded. Florida-based NextEra Energy jumped 5% and Duke Energy jumped 3%.

As more clean-energy Democrats came to power, renewable energy companies were also rewarded. First Solar rose more than 4% and solar parts maker Nextpower climbed 13%.

After President Donald Trump downplayed the potential for an escalation in Iran and Vice President JD Vance blamed his party’s election defeats on the war, the global oil benchmark fell 8%, falling below $100 a barrel for the first time in nearly a month. Oil producers and refiners also suffered on Wall Street.

ExxonMobil and Chevron fell 4% and 5%, respectively. Refiners Marathon Petroleum and Valero Energy, which recently posted record profits, plunged 9% and 7%, respectively.

“We had a referendum on inflation, high oil prices and Trump in general,” said oil forecaster Dan Pickering, founder of the consulting and research firm Pickering Energy Partners. “We have the impression that Trump will have more reluctance and less room for maneuver in terms of how he wants to conduct the conflict in Iran. »

What’s next?

There may be optimism about Iran peace talks, but this war is likely far from over, Pickering warned.

There is no clear compromise yet, and Trump could easily become frustrated and opt for escalation by January, as Trump himself predicted before the election.

“I think the Iranian conflict is becoming more complicated for the United States. We were looking for a way out, but we want a way out that doesn’t leave the Middle East in chaos,” Pickering said. Fortune. “I think this issue probably transcends elections. Even with more Democrats, I don’t think they’ll want a bad outcome to the Iran crisis. Oil is down, but it’s not collapsing.”

At the national level, much of the focus will remain on data center backlash and licensing reform. Some of the fastest growing states for data center growth are Texas, Georgia, and Ohio, and Democratic challengers all won gubernatorial elections in those states while pushing for data center moratoriums.

“‘Moratorium’ is certainly the buzzword,” Hua said, but it’s unclear whether these efforts amount to temporary pauses or outright opposition. “How high is electricity on the priority list? I suspect electricity, relative to data centers, will remain a priority for these new administrations.”

The AI ​​boom has brought the two sides closer together in terms of support for all of the above energy solutions. That’s why a bipartisan permitting reform effort, focused on accelerating energy construction of all kinds, was underway. But a Democratic surge is expected to prompt more of them to argue for waiting until next year to propose a version less friendly to fossil fuel projects. Such an effort could be risky because it would still require Trump’s signature.

“With greater leverage heading into 2027, Democrats have less incentive to accept pipeline provisions during the lame duck, pushing the debate toward a smaller clean energy transportation package or toward a no-deal,” Dumoulin-Smith added.

The legislation would facilitate the growth of long-distance transmission lines, which benefit renewable energy the most. As such, major transmission developer Quanta Services saw its stock fall 12% on Wednesday.

The bill’s Democratic sponsor, Sen. Sheldon Whitehouse, D-R.I., implored his party to continue supporting the bill Wednesday.

“Democrats ran and won on the basis of affordability, and this bill lowers costs for families and will allow us to start delivering on our campaign promises,” Whitehouse said. Fortune in a statement. “It’s a bird in the hand. We’d be fools not to take it.”