Editor’s Note: Winter came early to the Carolinas this year. We’ve already had several days of sub-freezing temperature, which is unusual around here for early December.

Last year, I hardly used my indoor gas fireplace at all. This year, it is the first thing I turn on after I get up in the morning.

I love the ambience of an indoor fire, even if it is fueled by natural gas instead of wood. Give me a cup of hot coffee and a challenging (but-not-impossible) sudoku puzzle to solve and I’m a happy man during these chilly mornings.

But now, I’m starting to wonder how much I’m going to end up paying for all that comfort. I don’t enjoy being cold, I dislike getting soaked even more!

Power Outage

I don’t share Wall Street’s vocal enthusiasm for oil producers if president-elect Trump follows through on his vow to bring energy prices down. It would be good news for consumers, since an increasing supply of oil should exert downward pressure on gasoline prices.

For the same reason, it could be bad news for most oil producers. Since their production costs are mostly fixed, falling wholesale oil prices squeeze their profit margins.

Despite their professed enthusiasm for the sector, portfolio managers on Wall Street are nervous about the potential for an oil glut next year. That is why The Energy Select SPDR Fund (NYSE: XLE) fell more than 8 percent over the past three weeks (circled area in chart below).

The fund’s top two holdings are Exxon Mobil (NYSE: XOM) at 21 percent of assets, and Chevron (NYSE: CVX) comprising 15 percent of the portfolio. If you ever want to know how Wall Street is feeling about the domestic energy sector, a quick glance at this fund will tell you everything you need to know.

I keep a particularly close eye on Chevron for two reasons. It is one of the longest-tenured holdings in the Personal Finance Income Portfolio, generating a total return (share price appreciation plus dividends paid) in excess of 3,100 percent since we first recommended it to our readers in 1990.

More is Not Always Better

Also, I consider Chevron a bellwether stock for the entire energy sector due its diverse portfolio of global assets. Its brands include Chevron, Texaco, and Caltex.

Chevron is a huge business. During the third quarter of 2024, the company generated $4.5 billion in earnings, or $2.48 per share.

That sounds impressive until you consider Chevron booked $6.5 billion in sales during the same quarter last year. That activity generated $3.48 of per share earnings, roughly 40 percent more than this year.

According to the press release accompanying those results, “Third quarter 2024 earnings decreased compared to last year primarily due to lower margins on refined product sales, lower realizations and the absence of prior year favorable tax items.” In other words, they made less money.

It further noted, “Worldwide net oil-equivalent production was up 7 percent from a year ago primarily due to record production in the Permian Basin and the acquisition of PDC Energy, Inc. (PDC).” If Trump has his way, oil production in the Permian Basin of Texas will go up even more.

Energy Policy, the Wright Way

I see no reason to believe Trump will not have his way regarding energy policy. His nominee for Secretary of Energy, Chris Wright, is an oil industry executive.

Wright also serves on the board of directors of Oklo (NYSE: OKLO), which produces small nuclear reactors (primarily for data centers) and recycles used fuel. The company is small and unprofitable, so Wall Street isn’t paying much attention to it.

That may soon change. My suspicion is Wright will nudge Trump’s energy policy in the direction of nuclear. That won’t placate the folks who only want renewable energy, but it should satisfy the clean energy contingent.

That partial eco-friendly distinction may be enough to gain regulatory approval to build more nuclear reactors in the United States. Especially now that data centers are consuming enormous quantities of energy.

That is why Sam Altman, the Founder and CEO of OpenAI, also serves on Oklo’s board along with Wright. All that sophisticated software using artificial intelligence only has economic value to the extent it can be immediately accessed online.

A Nuke in Every Data Center

Theoretically, every data center in the world could be powered by a small nuclear reactor housed on-site, similar to how a nuclear submarine operates. Of course, there are profound security issues that must be addressed, but it is technologically possible.

More importantly, it could soon be politically feasible. Wright should know better than anyone how to adjust the regulatory requirements and industry protocols to lessen the lead time and cost of developing a safe and robust nuclear program.

If Wright can pull that off, it could be a big win for energy consumers. It would also be a big wing for him personally, too. His oil and gas company will reap the benefits of increasing sales volume under Trump while his nuclear business could grow rapidly.

Of course, Wright must get confirmed for that to happen. I don’t see why he won’t, given his extensive experience in the energy sector.

After that, I will be watching him closely to see if he starts pushing a nuclear agenda. If he does, the entire energy sector could be in for major upheaval in the years to come.

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