Never mind gas prices; your power bill will cost you
By Liam Denning / Bloomberg Opinion
President Trump, like many Americans, has something of an obsession with gasoline prices. He might be better off focusing on another cost with which Americans are regularly confronted: electricity bills.
The electricity component of the Consumer Price Index was up 5.8 percent in June, year over year. This was the third month in a row where electricity came in above the broad inflation rate and marked an acceleration in that trend, rising to more than double the CPI’s 2.7 percent. Meanwhile, although Trump has a habit of citing fantasy sub-$2 gasoline prices, that inflation component just registered its 13th straight month of year-over-year declines. Looking at energy costs as a share of disposable personal income, gasoline took 1.59 percent compared with 1.15 percent for electricity in May (the latest month of available data), the narrowest spread in more than four years. Rather than pump prices, plug prices look more ominous.
In part, this reflects an unusually warm June keeping air conditioners cranked up, plus higher fuel costs. Natural gas-fired generation tends to set the wholesale electricity price, and both gas futures and power plant fuel costs have bounced back from very low levels a year ago.
But the big driver of the utility costs that feed into bills is spending on the grid, which tends to be stickier, too. This is all the more salient given Trump’s recent visit to Pennsylvania to tout multibillion-dollar investments in datacenters there. Winning the race for artificial intelligence is a core element of the administration’s focus on “energy dominance.” U.S. power demand is expected to rise quickly after lying flat for most of the past two decades, with datacenters playing a leading role.
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