Trump and Energy Policy

There is an ingrained belief that Republicans are good for the economy. In reality, Republican economic efforts are essentially limited to cutting taxes. Even if they manage to cut spending in some sectors, Republicans habitually increase military spending. As a result, revenue goes down, expenditures go up, and the national debt grows. The minute a Democrat is elected President, Republicans begin howling 24/7 about the debt and demanding cuts in social programs. But once a Republican again takes office, despite performative demands for debt reduction from some Republicans who capitulate at their first opportunity, deficits again increase. The simple fact is that Republicans don't care about the national debt. Complaining about the debt is a political tactic for some, but with the possible exception of Representative Thomas Massie, there is no real concern. Case in point: The version of the One Big Beautiful Bill Act just approved by the Senate increases the national debt by nearly $4 trillion. This is what passes among Republicans for a responsible economic plan.

Just today, private sector job growth came in much lower than expected according to the ADP private sector jobs report. Expectations were that 100,000 jobs would be added in June. Instead, 33,000 jobs were lost. In addition, the increase of 37,000 new jobs reported in May was reduced to 29,000. All eyes will now be on the government jobs report due to be released tomorrow. But, the ADP report is an indication of a softening job market. This should not surprise anyone. Cult leader, convicted felon, and failed President Donald Trump has taken action after action that is damaging to the economy. His on-again, off-again tariffs have made business planning in many industries impossible. His attempts at mass deportation have disrupted other industries and tariffs have added costs in still others. In the public sector, the efforts of the U.S. DOGE Service have resulted in hundreds of thousands of job losses among government workers. Trump has created an economy in which many companies are afraid to add new employees while others are unable to find the workers they need. Two weeks ago, the Federal Reserve released a report projecting that inflation would increase while economic growth would slow. Welcome to the Trump economy, making stagflation great again.

One area in particular in which Trump's policies are especially incoherent is the energy sector. Trump is, almost proudly, aligned with the oil industry. During the presidential campaign, he famously told a gathering of oil executives that if they raised $1 billion for his campaign, he would enact regulations favorable to them. Oil interests immediately began cutting large checks. Among Trump's first actions was to stop support for electric vehicles. He ordered that funding for the National Electric Vehicle Infrastructure or NEVI program be stopped and that any funds already disbursed to states be returned. This program was aimed at building EV charging stations along major interstate routes and, in a subsequent phase, installing chargers in underserved areas. A federal judge has recently ruled that the funding be reinstated. But the biggest attacks on electric vehicles have been in the One Big Beautiful Bill Act currently working its way through Congress. The legislation will end the new and used EV tax credits that have helped spur the sale of EVs. Also gone are credits for commercial clean vehicles and EV chargers. It is estimated that the loss of these credits will cost at least 2 million jobs. Many of those jobs are in states whose Senators voted in favor of the bill. The funding cuts will likely put a significant dent in the growth that has been seen in EV adoption.

The legislation also attacks the renewable energy industry more broadly. The act removes credits for solar panels and energy efficiency credits that incentivized homeowners to update their appliances. At one point, the Senate version of the legislation contained language that would place an excise tax on new solar and wind projects. Strangely, nobody could say how that tax was inserted into the bill. Senator Lindsey Graham, who was managing the bill, said that "It's a secret, I guess. I don't know where it came from." Given Trump's offer to the oil industry mentioned above, I would suggest this might not be as big of a mystery as Graham suggests. At any rate, the provision was removed at the last second before the bill was passed. However, the legislation will end production and investment tax credits for renewable energy projects that enter service after the end of 2027. These moves are not only environmentally unsound, they are bad from an economic viewpoint as well. The U.S. is facing increased demands for electricity, especially with the extreme energy requirements of artificial intelligence data centers. If anything, renewable energy projects should be incentivized. Instead, this bill is predicted to increase wholesale electricity prices 19% by 2030 and 61% by 2035.

But this does not mean that things are all rosy for the oil industry. To the contrary, the situation there is not looking all that great either. An article on the Oilprice.com website published in April said that "The U.S. shale industry is being hit by the crash in oil prices, which have slumped since President Donald Trump’s tariff announcement last week." Extracting oil from shale is an expensive proposition. As such, the industry needs oil prices to be sufficiently high to make the shale oil extraction profitable. Recently, prices have been below the necessary level. According to this article, producers need the price of West Texas Intermediate (WTI) to average $65 per barrel. Today, the price is $66.64, but that is after a +1.19 from yesterday. So things are very much touch and go. An article in the Midland Reporter-Telegram published yesterday offered a fairly pessimistic picture of things. There is currently plenty of oil available, causing prices to drop. According to the article, "S&P Global expects supply to outstrip demand by 1.2 million barrels per day in the second half of 2025".

Trump would have us believe that regulations and land use laws are preventing the pumping of additional oil and, as such, "drill, baby, drill" is the solution. But, according to the MRT, it is actually oil prices and the investment outlook that is preventing increased production. In fact, as the article says, the U.S. is "on track to register its first year-on-year oil production decline in roughly a decade". Moreover, "The price of oil and Wall Street remain the de facto regulators of U.S. crude production." The article quotes S&P analysts as forecasting that WTI prices could dip into the $40s this year. If this happens, what will be the fate of the shale industry that needs prices to be $15 a barrel higher than that? Another article on oilprice.com quotes Goldman Sachs analysts as suggesting that Trump wants an oil price in the $40 to $50 per barrel range. As the article notes, "Trump’s quest for lower prices at the pump had put him on a sort of a collision course with his oil industry supporters and donors." If, as appears to be the case, the economy slows, it will reduce demand for oil, which will result in price drops. Increased production — much of it coming from Gulf oil countries — will also put pressure on prices. This likely signals hard times for the shale oil industry.

To be clear, I am a proponent of renewable energy and would not be particularly upset to see the shale oil industry decimated. It would be particularly satisfying to see this happen in light of the support that industry has provided to Trump. However, if that is what is likely to happen, there should be plans for the transition. The economic, human, and environmental costs of an abandoned shale oil industry could be astronomical. Ideally, the shale oil industry would be transitioned into renewables, but that is not something Trump has the wisdom to lead. Rather, he is piloting us towards a situation in which we have electrical shortages and a surplus of oil. The opposite of a coherent energy policy. Oil and renewable electricity need not be in conflict. The state of Texas, which has long been the largest producer of oil in the U.S., is also the leader in renewable energy, by a lot. Unfortunately, the short-sighted Trump administration is going to set the U.S. back by decades and hand a major industry of the future over to China.