Over the past four years, household electricity costs have skyrocketed, with prices increasing by 21% and wreaking havoc on families’ monthly budgets. Recent data indicates the pain of rising energy bills is not abating, and economic observers argue that the future does not bode well for electricity affordability unless the country significantly accelerates oil and gas production.
Electricity Affordability Crisis Coming?
President Donald Trump announced on August 21 that he will not approve solar or wind power projects. “We will not approve wind or farmer destroying Solar,” Trump posted on Truth Social. “The days of stupidity are over in the USA!!!” The reason, the White House says, is that renewables are the primary cause behind surging electricity prices.
Despite Trump and his team advocating for an all-of-the-above approach to energy production during the 2024 election campaign trail, the administration is ostensibly scaling back federal involvement in the green energy sector by axing solar and wind tax credits and tightening federal permitting for renewables. While the green energy obsession of the previous administration has been one of the contributing factors to the nation's power struggles, it is clear that demand is outpacing supply and could be the start of an electricity affordability crisis.
Today, the United States lacks a reliable power grid system to handle the surge in electricity demand, primarily fueled by data centers for artificial intelligence and robotics. Data centers account for 7% of total US power demand, and this figure is projected to reach 12% by 2030, equivalent to the electricity consumption of Scandinavian countries.
Prices have risen 22% for new power capacity on the nation’s largest grid, PJM Interconnection, which covers a dozen states in the Mid-Atlantic, Midwest, and the South. In the July Consumer Price Index report, electricity prices rose 5.5% year over year but decreased 0.1% month over month, following a 1% increase in June.
Ultimately, this is not a situation that will inevitably develop into a problem for John Smith and Jane Doe. It is happening right now. New data from the National Energy Assistance Directors Association shows that the average household power bill is projected to climb by almost $800 from June to September, up 6% from last year's average.
It seems that retiring coal, shunning nuclear power, and relying on windmills over the past decade has been a disastrous public policy decision by politicians and unelected bureaucrats. Treasury Secretary Scott Bessent’s Three Arrows economic policy, which includes adding three million new barrels of crude oil a day to production levels, will prove to be necessary in the immediate future.
Coffee Shock
Tariffs are not inflationary? While President Trump's sweeping global levies have not resulted in an aggregate spike in consumer inflation, they could be targeting specific items. One example is the nectar of the gods, the fuel of western civilization, and the lifeblood of tired men and women: coffee.
Earlier this month, the president implemented tariffs on coffee-producing countries: Brazil (50%), Vietnam (20%), Costa Rica (15%), Colombia (10%), and Ethiopia (10%). More than half of the US coffee imports originate from Brazil (37%) and Vietnam (17%), meaning that not only will these markets face challenges, but American coffee lovers will also be adversely impacted.
Over the past 12 months, coffee prices have rocketed 50%, trading at around $3.65 per pound on the US ICE Futures Exchange. In last month's CPI report, coffee prices surged 2.3%, with roasted (Arabica) and instant (Robusta) varieties increasing by 2.1% and 1.6%, respectively.
Several factors have contributed to higher prices, primarily due to unfavorable weather conditions for farmers; however, tariffs will further exacerbate the issue. The United States does not have a coffee-producing industry because it lacks a climate suitable for coffee production, rendering these tariffs superfluous.
EU Trade Details
The White House released some of the contours behind the US-EU trade agreement.
While some components have already been reported, the sweeping pact contains provisions requiring the 27-member bloc to purchase at least $40 billion worth of US-made artificial intelligence chips for data centers. The US will maintain its tariffs on European automobiles for now, but will eventually reduce the rate to 15% after the region lowers its levies on American products.
EU Trade Commissioner Maros Sefcovic called it "the most favorable trade deal the US has extended to any partner" to date. The White House, meanwhile, reported that the framework will revitalize America's reindustrialization efforts and reverse the trade imbalance.
"This Framework Agreement will put our trade and investment relationship – one of the largest in the world — on a solid footing and will reinvigorate our economies’ reindustrialization. It reflects acknowledgement by the European Union of the concerns of the United States and our joint determination to resolve our trade imbalances and unleash the full potential of our combined economic power.
“The United States and the European Union intend this Framework Agreement to be a first step in a process that can be further expanded over time to cover additional areas and continue to improve market access and increase their trade and investment relationship."
Commerce Secretary Howard Lutnick recently stated that the United States will release trade documents regarding deals with Japan and South Korea.
Bernie Salutes Trump
Are President Trump and Sen. Bernie Sanders (I-VT) on the same page? In a statement to Reuters, Sanders expressed support for the administration’s proposal to convert US chipmaker grants into government equity stakes, highlighting an alignment in economic policy between the two men regarding state intervention.
"If microchip companies make a profit from the generous grants they receive from the federal government, the taxpayers of America have a right to a reasonable return on that investment," Sanders said.
His remarks come as the White House seeks a 10% stake in struggling chipmaker Intel in exchange for the nearly $11 billion in funding from the Biden-era CHIPS and Science Act.
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