Sullivan: What the 2026 midterms could mean for energy investors

The author expects U.S. energy demand to keep rising and says midterm results are unlikely to drive major near-term moves in energy stocks, while state-level decisions could affect data-center projects. Goldman Sachs raised its oil forecasts, citing Iran- and Russia-related risks, to $105 Brent and $94 WTI for the rest of the year; next-year average targets rose to $88 Brent from $80 and $78 WTI from $73. Marathon Petroleum reported $26.59 EPS and $11.7B EBITDA, versus $3.01 EPS and $3.2B EBITDA a year earlier; the author also warned of fragility in tech and high-yield debt markets.

Analysis

Election risk is more likely to reprice project timing than near-term energy volumes. The investable transmission is state-level permitting: delays can defer utility and equipment orders even if underlying electricity demand holds up. That makes ENR and RWE exposed to a mismatch between long-dated power demand and near-term project execution; rising rates and tighter credit could compound any permitting delay. Watch actual interconnection queues, approvals and order conversion—not candidate rhetoric.

The stronger near-term driver is the oil and product balance, but “higher energy prices” is not a uniform equity trade. Upstream exposure at XOM, CVX and COP can benefit from sustained crude strength; MPC depends more on refining margins than the crude price itself, so crude spikes without stronger product cracks could pressure it. MPC’s unusually strong reported results are a poor basis for extrapolating normalized earnings. For EQT and RRC, the proposed combination may improve scale, but the thesis still depends on deal terms, integration, U.S. gas basis and export capacity; European gas tightness does not automatically translate into higher U.S. realized prices.

Contrarian risk: the article treats demand as resilient, but data-center pipelines are not firm load. Cancellations, efficiency gains, self-generation or grid constraints could push expected equipment and generation demand out, while peace or weaker macro conditions could quickly unwind geopolitical price premia. The key near-term catalyst is not Congress itself but developments around Hormuz, Ukraine and product flows; the structural test is whether power projects reach construction and operating load.

Key Decisions for Investors

• Do not trade the midterm outcome as a broad energy-stock catalyst. Track state permitting decisions—especially Texas—and change exposure only when approvals, interconnection timelines or utility capex plans move.
• For a geopolitical oil-risk expression, prefer a measured long in XOM or CVX over treating MPC as a crude proxy. Reassess if crude retreats on de-escalation or if product cracks weaken; avoid extrapolating MPC’s reported quarter without normalized refining-margin data.
• Keep EQT/RRC on an event watch rather than adding solely on European gas headlines. Verify transaction terms, expected leverage, integration milestones and regional basis exposure; U.S. benchmark prices and LNG capacity are the transmission points to monitor.
• Treat ENR and RWE as longer-horizon, rate- and execution-sensitive power-demand exposures, not immediate beneficiaries of AI load. Add only if project/order conversion holds up despite financing costs; revisit the thesis if data-center cancellations rise or guidance/order intake softens.