Oil prices are down from their highs earlier this year, OPEC has given up its attempt to push oil to $100 per barrel, and inflation seems to be tamed. Although everything remains higher than it was four years ago, in relative terms the situation has improved markedly since 2022.

Those are not conditions ripe for the oil and gas industry to keep growing. Further, despite the election of Donald Trump providing what should be a catalyst for energy sector expansion, Chevron (NYSE:CVX) could have difficulty achieving growth over the next four years. A $200 per share stock price, which would be a better than 25% gain from current levels, might not be attainable.

24/7 Wall St. Insights:

• Chevron (CVX) is the second-largest energy company with vast global resources, which actually works against it during a Trump presidency.
• The President-elect has promised heavy tariffs on imported goods, and with a significant majority of Chevron’s profits coming from international sources, a Trump administration could be a net negative for the oil and gas giant.
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Opening new opportunities for fossil fuels

Trump ran on a campaign of easing regulation and overhauling corporate tax policy. He has promised to eliminate 10 regulations for every new regulation created. Elon Musk will be tasked with overseeing a new Department of Government Efficiency to cut $2 trillion from the federal budget and Trump has said corporate taxes will be cut from their current level of 21% to as low as 15%.

If successful, these actions alone might be enough to cause significant earnings expansion for businesses to push their stock prices higher. His call for a shift in policy on natural resources to promote domestic stockpiles, particularly for oil and gas, might also see the fossil fuel industry witness substantial gains.

But there would be headwinds, too. Tariffs on imports may be burdensome for oil. The U.S. Energy Information Administration says this country imported 8.5 million barrels of oil per day in 2023, with crude oil representing 76% of the total, or 6.48 million barrels per day.

Conversely, the U.S. exported 10.15 million barrels per day of petroleum, with crude accounting for 40% of the total.

Where the industry will likely see the greatest impact is in opening federal lands to more production. Onshore oil production on federal lands represented about 12% of total output last year, and it was as much as 26% when offshore production was included.

Most of Chevron’s profits come from overseas

Chevron, though, generates most of its profits from its international operations. Its upstream exploration and production operations generated $13.3 billion in earnings in 2023, or 62% of its total $23.4 billion in net income. Domestic production accounted for $4.1 billion in profits.

Moreover, most of the crude oil processed at Chevron’s Pascagoula, MS, refinery comes from international sources. Its U.S. downstream operations contribute the lion’s share of the oil company’s segment profits. The $3.9 billion in downstream profits represented 64% of the total.

A new domestic focus may not be enough

As the second largest integrated oil and gas company, Chevron has been training more of its attention on U.S. operations, particularly in the Permian Basin. Following its acquisition of Noble Energy in 2020, which bolstered its position in the region, Chevron is one of the largest producers of oil and natural gas in the Permian. It has approximately 2.2 million net acreage, three quarters of which has low or no royalty payments. It has thousands of potential well locations in the Permian, which has allowed it to triple the pace of its drilling program.

Still, Chevron continues to look internationally for growth too, especially in Guyana. Its pending $53 billion acquisition of Hess (NYSE:HES) would give it a greater presence in the oil-rich nation’s offshore assets. Guyana has become the world’s fastest-growing oil region over the past decade.

Although there are a lot of puts and takes from a Trump presidency with respect to the energy sector, the overall impact may not be a net positive for Chevron. Although CVX stock is up 60% over the last five years, I believe lower demand for oil, lower oil prices, and Chevron’s reliance upon international resources for most of its profits makes attaining a 25% or so gain to $200 per share a tough threshold to break through.

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