Commentary: Trump has an energy problem — and it's not gasoline

Commentary: Trump has an energy problem — and it's not gasoline Rick NewmanJuly 16, 2025 at 5:00 AM When gasoline prices are high, just about everybody knows it.

- - - Commentary: Trump has an energy problem — and it's not gasoline

Rick NewmanJuly 16, 2025 at 5:00 AM

When gasoline prices are high, just about everybody knows it. Gas prices have a famous correlation with consumer attitudes, with high pump prices bumming people out and low prices signaling everything's OK.

Hardly anybody knows the price of electricity. But Americans spend more on household energy than they do on gasoline, and a kind of stealthy inflation is now underway in one of the nation's most confusingly priced commodities. Rising energy prices are pushing housing costs higher and causing a problem for President Trump, who promised cheap energy and lower inflation than his predecessor, Joe Biden.

The cost of household energy, which includes electricity and other fuels such as heating oil, propane, and natural gas, has jumped 7.1% during the past year. That's the biggest year-over-year increase since 2023.

Electricity prices rose 5.8% in June, the biggest jump since last May. Overall inflation rose just 2.7% in June. So, household energy is rising by more than twice the rate of inflation.

Energy prices can be volatile, moving on geopolitical shocks, weather, and sharp swings in supply or demand. But rising domestic energy costs are no fluke. The US Energy Information Agency expects the price of oil and gasoline to drop throughout 2025 and 2026. But it expects retail electricity prices to rise by nearly 4% in both years. It also forecasts higher price hikes in areas where electricity is already expensive, such as the northeast and Pacific regions.

On average, during the past 15 years, home energy costs have risen by slightly less than the overall rate of inflation, especially excluding the energy price spike that followed Russia's invasion of Ukraine in 2022. Abundant natural gas from the fracking boom kept the cost of electricity relatively low, since gas powered nearly half of all electricity generation. At the same time, wind, solar, and other renewable energy sources grew as a source of power and came down in prices as technology scaled.

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But several factors are now causing higher energy inflation. Natural gas still powers 40% of electricity generation, but American exports of natural gas have quintupled during the past 10 years. Domestic production has risen by just 46% during the same time. The rising share of domestic gas going to exports has pushed domestic prices higher.

Prices haven't skyrocketed, but they're about 30% higher now than during President Trump's first term, which was the peak of the fracking boom. The EIA is forecasting another 6% jump in natural gas prices this year and a 19% gain next year.

Electricity consumption in the United States flatlined from 2010 to the early 2020s, largely due to improving efficiency. But consumption hit new record highs in 2024 and is likely to keep rising.

Data centers powering artificial intelligence are a big new drain on the grid.

The biggest jump in demand will likely come from the commercial and industrial sectors. Electric vehicles are also a factor, driving up residential demand as well.

Read more: Are electric cars more expensive to insure?

One of Trump's signature policies is "drill, baby, drill" — the idea that the US needs more fossil fuel production. The tax bill Trump just signed eliminated hundreds of billions of dollars in green-energy tax breaks that former President Joe Biden signed into law just three years ago, while including a few new policies favorable to oil and gas.

But Trump's support for fossil fuels may not help lower home energy costs.

First, oil doesn't power most homes, and it's a small portion of the fuel used for heating. Producing more oil does produce more natural gas as a by-product. But American drillers don't want low prices, and they're not going to produce so much energy that prices, and their profits, plunge. Trump can exhort them to produce more, but he can't order them to do so the way monarchical rulers in the Middle East determine national energy production.

Will electricity prices come back to bite him? President Trump speaks to members of the media before leaving the White House on July 15. (AP Photo/Manuel Balce Ceneta) ()

The US grid is also old, with a lot of rebuilding going on. Americans in some parts of the country can't get cheap energy from gas or solar because there are no transmission lines or pipelines to deliver it — and many local jurisdictions want to keep it that way. Trump's tariffs aren't helping. His metal tariffs, as one example, are driving costs higher for much of the equipment needed in heavy capital projects such as energy infrastructure build-outs.

Local regulators in most places limit the price hikes utilities are allowed to impose on retail customers. But regulators and policymakers also need to let utilities upgrade their equipment and make other costly improvements. Many utilities are also building new storage facilities for power generated from renewables, which is generally lost if not used immediately. That could lower energy costs in the future, but somebody has to pay for the development.

Regulators typically let utilities pass some of these costs on to consumers, under squishy-sounding billing categories such as "transmission" or "delivery" charges. Plus, regulators can't control the market price of fuel, and they often let utilities pass those price hikes on as well. Consumers might not notice rising home energy costs as quickly as they spot a 20-cent jump in the price of gasoline, but when it comes out of their wallets, they wise up soon enough.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.

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