Trump’s National Energy Emergency: A Costly Promise
Follow the discussion on LinkedIn | Follow the discussion on X.com
President Trump just declared a "national energy emergency," granting additional powers to secure domestic energy. Ultimately the objective is to reduce energy costs for customers, a goal we’re all aligned on. However, the reality may look quite different. Energy costs follow a simple economic principle: supply and demand. To lower costs for customers, you either increase energy supply or decrease energy demand. Under this declaration, new energy initiatives may disrupt this balance, potentially keeping customer costs high—or even raising them.
Let’s break it down (and hope my old economics professors at UChicago never see this):
Exporting More Gas: Decrease supply → Increase costs
It is true, the push to expand liquefied natural gas (LNG) exports may be a way to highlight American energy power globally. However, expanding exports will likely benefit shareholders more than US customers. By focusing on exports, the U.S. risks exposing itself to volatile global markets in which international buyers can outbid domestic consumers. According to a DOE study, unrestricted exports could increase domestic natural gas prices by over 30%, adding more than $100 annually to the average household’s energy bill by 2050.
Fading Demand-side Programs: Increase demand → Increase costs
Clean energy and energy efficiency programs have historically helped households save hundreds of dollars a year. Investments in demand-side resources and energy-efficient appliances help reduce household energy consumption which drive down costs for customers. A rollback of these initiatives could leave households with fewer options to reduce their energy bills. On top of this, fading out current policies could make energy more expensive for Americans. For example, many Americans bought electric vehicles on the belief of receiving incentives and prevalent charging infrastructure. A change in policy now would make these investments more costly than initially planned for.
Drilling More Oil: Increase supply (boom-and-bust) → Increase costs
U.S. oil production is already at record levels. A push for more drilling could potentially trigger a classic boom-and-bust cycle if supply becomes too excessive, which could increase customer prices. For example, since oil is already at an all-time high, increasing supply too quickly could lead to too much supply. This excess supply may immediately lead to lower prices that help stimulate demand; however, if this demand grows faster than supply, prices could very quickly rise to even higher levels! As we enter this period of time, we should continue to lean into lower cost alternatives like clean energy. Clean energy options can be used as a mechanism to help break this oil boom-and-bust cycle.
Disregarding Decentralized Infrastructure: Increase supply → Increase costs
When it comes to electricity prices, about 40% of costs are tied to transmission and distribution infrastructure. These costs don’t change with policy - this is infrastructure needed to support the grid. However, given growing electricity demand, we need to invest even more in T&D to avoid rolling backouts. While more centralized oil, gas, and coal plants can meet some of our power supply needs, we’ll likely require hundreds of billions of investments in decentralized infrastructure to connect this power to customers. Many utilities are already going through rate case processes, getting approval for these grid upgrades and the cost impact for their customers. For example, Florida Power & Light plans to raise rates by an average of 2.5% annually from 2026 to 2029 to fund grid modernization and energy projects. As we continue to add more energy supply to our grid, these rates will continue to increase.
A Comprehensive Energy Strategy
Although ambitious, Trump’s promise to cut energy costs by 50% is likely a tough feat to hit. Even during the pandemic, when energy demand collapsed (to an unhealthy degree), household energy costs only dropped by 19%.
Will sudden changes in energy supply and demand impact customer prices? Absolutely. Could they result in short-term price reductions for consumers? Possibly. However, the pressure is now on the energy industry to find a long-term, sustainable path towards customer affordability - getting closer to that 50%. To do this, this means several solutions, not one solution. As we lean into more centralized power supply through oil and gas, we need to invest in supporting infrastructure that balances these initiatives - technology that helps with pricing arbitrage (batteries), technology that delivers this cheap power to customers (T&D), and technology that gives customers more control over their bills (DERs). By embracing a comprehensive energy strategy that bolsters domestic energy production, we can work towards a shared goal of reducing energy costs for customers long-term.