Republican presidential nominee, Donald Trump, has made a bold promise: to cut American energy costs by half or more. However, experts are scrutinizing this pledge, highlighting the intricate workings of global and regional energy markets.
Trump’s plan to lower energy costs hinges on accelerating permitting processes, loosening environmental regulations, and implementing other measures aimed at boosting oil and natural gas production. But according to a recent Wall Street Journal report, many oil drillers are hesitant to ramp up production, opting instead to return profits to shareholders.
The energy market is influenced by a wide range of factors, including weather patterns, global conflicts, and regional market dynamics, making it challenging to manipulate prices through executive orders. “It’s mostly just bluster, because the president actually doesn’t have any direct control,” stated Michael Webber, a professor of energy resources at the University of Texas at Austin. While recent price pressures have eased, the national electricity price increase has outpaced overall consumer price increases.
A Trump campaign spokesperson argued that the effects of his plan would be immediate, with energy prices predicted to plummet in anticipation of a new supply surge. However, the “Drill, baby, drill” mantra, once a driving force in the industry, has lost its allure for many of the largest shale drillers. These companies are exercising caution due to the uncertain global economic outlook and past experiences of market downturns.
“There is nothing that you could wave your magic wand at from a political perspective and get that kind of an increase in production,” said Adam Rozencwajg, managing partner at the natural-resource investment firm Goehring & Rozencwajg.
Trump’s promise to relax Biden-era rules on fossil-fuel-fired power plants has also raised concerns. The president’s influence on electricity costs is limited, as they are highly sensitive to natural gas prices and regional differences in power generation.
While Trump’s deregulation agenda could potentially benefit oil and gas stocks, his accusations against OPEC of manipulating oil prices to favor Vice President Kamala Harris have raised concerns. Citi has warned investors about the potential risks to oil prices under a Trump presidency due to his oil-friendly policies and proposed tariffs.
The effectiveness of Trump’s energy plan remains a subject of debate, with experts cautioning that his promises may not be as easily realized as he suggests. The complexity of the global energy market and the limited control the president has over key factors, like electricity prices, pose significant challenges to achieving his stated goals.
