Energy News: Does the Election of Donald Trump Guarantee Lower Natural Gas and Electricity Prices?
Energy News: 12 November 2024 Does the Election of Donald Trump Guarantee Lower Natural Gas and Electricity Prices? Natural Gasis
Energy News: 12 November 2024 Does the Election of Donald Trump Guarantee Lower Natural Gas and Electricity Prices? Natural Gasis
Energy News: 12 November 2024
In our August 20th Energy Update, we said an administration more favorable to the fossil fuel industry could impact the start of a Secular Bull Market lasting many years, but with today’s prices being below the cost of production and America’s Natural Gas exports expected to continue increasing for the foreseeable future supports our belief that we are in the early stages of a Cyclical Bull market with prices trending higher at least 2 to 4 years.
Our premise was supported by the empirical observation that since 2000, when Natural Gas declined to where it is in 2024, it always preceded Cyclical Bull markets that trended higher 2 to 4 years, and it didn’t matter who was president at the time!
Another factor supporting higher Natural Gas and Electricity prices long term was discussed in an New York times article released earlier this year, which said something unusual is happening in America. The Demand for Electricity, which has stayed largely flat for two decades, has begun to surge.
“Over the past year, electric utilities have nearly doubled their forecasts of how much additional power they’ll need by 2028 as they confront an unexpected explosion in the number of data centers, an abrupt resurgence in manufacturing driven by new federal laws, and millions of electric vehicles being plugged in. Many power companies are already struggling to keep the lights on, especially during extreme weather, and say the strain on grids will only increase.”
Although the new administration may attempt to curtail the swift transition to electric vehicles the overall growth in power needed by electric utilities will continue to increase, which will support higher prices long-term.
But where will prices likely go near term?
No one can forecast pricing with 100% certainty, but when I looked back at President Trump’s first election in 2016, I noticed striking similarities in the energy market to his election in 2024 that may help guide us now.
When President Trump won the election on Nov 8, 2016, Natural Gas supplies were near a record high of 4 trillion cubic feet, and Natural Gas closed at $2.63 per MMBtu on election day:
As you can see from the above chart, after reaching its Spring low Natural Gas trended higher into election day. Supplies were near record levels, and President Trump promised to institute policies to increase production, and most believed prices would have to go lower, but surprisingly Natural Gas rallied into the end of the year closing at $3.72 per MMBtu.
And as we observed in the long-term chart, during President Trump’s 1st administration, Natural Gas experienced a Cyclical Bull Market, and the average price of Natural Gas was much higher than it was on election day:
Why was the average price of Natural Gas higher during President Trump’s first administration?
In our Feb 19th, Energy Update we pointed out when Natural Gas declined to unsustainably low prices below the cost of production the average price was always higher long-term. We also said the longer prices stayed low the higher they would go later! This is a byproduct of the weaker companies being forced out of business thereby decreasing competition, and the surviving companies are highly motivated to increase prices to make up for lost profits accrued while prices were low.
The question is, are there similarities to where we were on election day in 2016?
Yes, there are, similar to 2016, after reaching its Spring low this year, Natural Gas has trended higher and closed at $2.67 per MMBtu on election day:
Also, similar to 2016, Natural Gas supplies are again near a record high of 4 trillion cubic feet on election day, and Natural Gas is trading near the same price it was in 2016’s election day, $2.67 versus $2.63 per MMBtu in 2016.
And it is understandable why similar to 2016 you may hesitate reserving Natural Gas and Electricity at this time believing todays near record storage, and President Trump’s energy policies will result in lower prices. But based on what happened in 2016, and the empirical observation that since 2000 when Natural Gas was as low as it is in 2024, the average price was always higher at least 2 to 4 years, we believe it is wise to reserve energy now and not wait hoping for lower prices.
Therefore, we recommend anyone with agreements expiring within the next 18 months take advantage of today’s low Natural Gas rates, which based on long-term historical data will likely be lower than where their rates are expected to be at least through 2025.
Not every client’s risk tolerance and hedging strategy are the same, but the goal of our reports is to reveal your risk/reward opportunities. We invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
Energy Professionals is committed to finding its customers the best possible rates on electricity and natural gas. Tell us your location and service type and our energy manager will connect you to the most competitive offers.
Switching to an alternate supplier is easy. There is no chance of service disruption, and you'll continue with your current utility for energy delivery and emergency service. Take a few minutes to discover your best offers, and enjoy the benefits of retail energy in your home or business.
1. Energy Type
2. Service Type
3. Zip Code
We believe that knowledge is power. Here’s a free e-book that provides business solutions to reducing energy costs.
Download E-Book Free Energy Audit
