By Lisa Friedman
President-elect Donald Trump has consistently assured voters that he would cut energy and electricity costs by 50% within 18 months of taking office.
According to three individuals familiar with the discussions, who requested anonymity to speak about internal affairs, his transition team is currently developing a strategy to achieve this.
The preliminary plan is a rebranding of Trump’s energy agenda. Advisers believe that Trump can decrease prices by increasing oil and gas production, which is already at unprecedented levels in the United States. To ramp up production, he aims to swiftly authorize new drilling operations and pipeline projects while eliminating environmental regulations that the industry claims increase its expenses.
Nevertheless, energy industry experts pointed out that a president has limited options to affect how much Americans pay at the gas station, and even less influence regarding electricity costs. Over a dozen experts stated that while Trump’s plan might lower prices, it may not be sufficient to achieve his target.
“It can’t happen,” remarked Ed Hirs, an energy economist from the University of Houston.
“Good luck,” added Gernot Wagner, a climate economist at Columbia Business School.
“It is not entirely impossible, but highly improbable,” claimed Edmund Crooks, vice chair of the Americas for Woods Mackenzie, an energy consulting firm.
Karoline Leavitt, Trump’s spokesperson, refrained from elaborating on specifics but asserted that Trump would indeed halve energy costs. “He will deliver,” she stated.
One method Trump expects to employ is increasing production by rapidly approving drilling licenses on federal territories and waters.
He also aims to revise the National Environmental Policy Act, a fundamental environmental regulation, in ways that could exempt gas pipelines and other energy initiatives from environmental evaluations. This was an effort Trump attempted during his first term, but it took three years to finalize and was undone by the Biden administration.
Those close to the Trump transition claimed that these actions would “unleash” millions more barrels of U.S. crude production.
Energy analysts concurred that production would likely increase under Trump’s administration, and prices would fall. However, most indicated it wouldn’t be enough to halve gas prices.
“The U.S. is integrated into a global oil market, where international circumstances primarily drive prices,” Crooks stated. “Is it conceivable that U.S. production could increase sufficiently to reduce prices by half sustainably? No. That’s very unlikely.”
If it were to happen, Crooks and others warned, it could create other issues. Achieving the price levels Trump envisions could render energy companies unprofitable.
Economists noted that the minimum price at which oil operators can extract without incurring a loss ranges between $45 to $50 a barrel. Currently, oil prices are around $70 per barrel.
Should prices plummet to half that figure, “at that price, you’re halting production,” stated Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.
Trump has also pledged to repeal all of the Biden administration’s regulations designed to curb carbon emissions from vehicles, smokestacks, and oil and gas wells. This could potentially save utilities and oil firms billions.
“It’s hard to overstate how significantly the regulatory landscape for oil and gas is going to improve,” noted Bob McNally, president of the research company Rapidan Energy Group and a former White House energy advisor during the George W. Bush administration.
However, McNally also stated that deregulation coupled with rapid permitting of new drilling might not lead to immediate production increases or significant cost savings for consumers.
“I’ve searched for the magic solution to lower prices,” McNally remarked. “I couldn’t find it.”
Regarding electricity costs, which fluctuate depending on location, approximately 40% consists of distribution and transmission charges that do not change with policy adjustments, explained Chris Seiple, vice chair of Wood Mackenzie’s Power & Renewables group.
Cheaper natural gas could decrease electricity expenses, but not by half, he indicated.
Both Seiple and Bordoff posited that expediting the establishment of transmission lines and gas pipelines could lessen electricity costs by enhancing grid capacity.
However, another of Trump’s pledges — to increase liquefied natural gas exports — could shift prices in the opposite direction. If European or Asian countries are willing to pay elevated prices for U.S. gas, it could increase domestic prices, resulting in higher electricity bills, analysts warned.
On the campaign trail, Trump reiterated his commitment to slash electricity and gas prices more than four dozen times. Yet, he also provided himself a loophole.
“We aim to reduce prices by half within 12 months, at most 18 months,” Trump asserted. “And if it doesn’t pan out, you can say, oh well, I voted for him. I still managed to lower it considerably.”
