How might the election outcome impact the outlook for ASX energy shares?

That’s the big question on many investors’ minds.

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Key points

  • ASX energy shares continue to drive higher in 2022, posting strong gains this week
  • There's a chance the federal election result could have an impact on the ASX energy basket, some experts say
  • That leaves some measure of headroom and/or legroom for energy stocks, depending on the outcome

ASX energy shares have posted strong gains so far in 2022 amid surging energy prices and a now two-year-long commodity boom.

Investors have flocked to energy stocks this year in the wake of rising inflation, both caused by and the result of rising commodity prices.

As the debate surrounding renewable energy transition continues, market and industry pundits argue we must pay close attention to the ripple effects of such far-reaching decisions.

How could the election influence things?

As the deadline for Australia’s next federal election looms, the question of government policy is on investors’ minds.

Depending on the outcome, a Labor or Coalition government could potentially oversee different results for the energy industry.

Opinion in the Murdoch press suggests Labor may consider additional taxes on carbon polluters.

Such a move could have a direct impact on resources giants such as Whitehaven Coal Ltd (ASX: WHC) and Woodside Petroleum Ltd (ASX: WPL).

However, Labor has outlined its energy policy to reduce carbon emissions by 43% by 2030 as part of the “global energy transition”. It does not include mention of additional taxes on carbon producers.

The need to tread carefully

Speaking at an Australian Superannuation conference today, Macquarie Group Ltd (ASX: MQG) CEO Shemara Wikramanayake shared her perspective on the issue.

“We have to think about how we do this balanced transition. People need energy and if we end up creating energy scarcity, we could lose the mandate for the transition,” Ms Wikramanayake said, cited by The Australian.

The coal industry is very profitable but it is going to run off. The people of Newcastle, the people of Australia need new industries, and we need new reskilling for jobs.

Let‘s not go so fast that we blow up the mandate to do this, because without the solutions we can’t switch. We can’t just shut off all the energy and go back to living like cave people.

With energy prices surging, all eyes have been on utilities players this year and their returns have certainly matched the sentiment.

Energy giant Origin Energy Ltd (ASX: ORG) shares have gained 26% this year to date whilst fellow player Santos Ltd (ASX: STO) has jumped 25% as well.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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