"All forecasts are BS. Some smart and well-thought-out BS, but BS all the same. Tomorrow is unknown because it is tomorrow, and most forecasts leave out the crucial pieces of information that are not known from history as it hasn’t happened yet."
This advice from a seasoned financial advisor serves as a useful lens when evaluating today’s energy market predictions. Two dominant narratives are emerging as we head into 2025:
AI energy demand will significantly drive up energy commodity prices, especially natural gas, due to its scalability for rising power needs.
Source: Yahoo Finance
Trump’s economic plans will likely spike inflation, contradicting his campaign promises of economic stability.
Both narratives contain valid points, but I believe they overlook key counterforces that will likely keep energy prices—particularly natural gas—low and inflation under control. The incoming administration’s strategic energy policies are a critical pillar in their goal to keep inflation low and outgrow the debt. They will almost certainly exploit any lever available to prioritize domestic production, reduce regulatory burdens, and support infrastructure investments across industries, especially around energy.
Natural Gas Prices: The Counterargument
The claim that AI-driven energy demands will send natural gas prices soaring assumes a constrained supply unable to scale alongside rising demand. But this argument is short-sighted and fails to account for several factors at the new administration's disposal:
1. Quickly Ramping Production Capacity
The U.S. has repeatedly demonstrated its ability to scale oil and natural gas production quickly when needed. With the incoming administration prioritizing energy independence:
Regulatory rollbacks could cut approval times and compliance costs by 30-50% (or more), clearing the way for faster supply growth.
New drilling leases on federal lands and pipeline approvals will unlock additional resources, ensuring scalable production (something Howard Lutnick discussed at length in recent months).
Infrastructure investments in LNG terminals and pipelines will remove bottlenecks that previously constrained supply, addressing medium to long-term supply needs domestically (the US currently exports and imports natural gas that it cannot transport across the nation).
In short, U.S. producers can help meet rising demand from AI and other industrial sectors without significant price spikes.
2. Energy Policy as an Inflation-Fighting Tool
The second major concern—inflationary risks from Trump’s policies—also fails to consider the role of energy supply in containing inflation.
For half a century, China has demonstrated how would-be inflationary policies like rampant money printing can be tampered by investing heavily in supply-side industrialization and reducing energy supply constraints. The US is likely to embark on similar paths if they wish to re-shore industrial capacities and outgrow the national debt.
Regulations remain a primary driver of supply constraints, particularly in the petroleum and natural gas markets. By cutting regulatory red tape:
Domestic suppliers will increase output, ensuring energy costs remain low.
Affordable energy will mitigate inflationary pressures across power-hungry sectors like AI data centers and manufacturing.
Lower production costs will ripple through the economy, stabilizing prices without the need for monetary tightening.
Rather than fueling inflation, these policies will help combat it by addressing supply-side constraints that often go overlooked. This is a critical goal of a Trump administration set on keeping his inflation promises to help his party stay in power.
3. Strategic Tools Like the SPR
The administration would be wise not to misuse the Strategic Petroleum Reserve (SPR) for short-term gains. Instead, it will likely focus on replenishing reserves during periods of low prices, thereby positioning the SPR as a stabilizing tool against geopolitical disruptions—not an immediate market influencer.
It's worth noting that nothing could derail the plan to outgrow the debt and keep inflation low like a major conflict with a US ally (or worse, the US itself). The SPR will need to stay in place in case of such a shock to the system.
Why Popular Predictions Will Miss the Mark
The flaw in many forecasts is their failure to account for dynamic policy shifts and unforeseen variables. I speculate that forecasts related to presidents are based much on hope as well.
While concerns about inflation under Trump’s policies are valid, they overlook the many levers the administration has at its disposal to reduce price pressures. Regulatory reform, infrastructure expansion, and strategic production increases can act as stabilizing forces, ensuring economic resilience.
Rising AI energy demands are real, but the assumption that they will outpace supply ignores the agility of U.S. energy producers. With clear policy intent to enable growth, domestic production can scale quickly to meet demand without triggering significant price hikes.
Conclusion: Stability, Not Crisis
The dominant narratives around natural gas shortages and inflation risks are compelling but incomplete. By focusing on domestic production, infrastructure investments, and regulatory streamlining, the incoming administration can:
Meet rising energy demands without significant price hikes.
Use energy policy as a stabilizing force to mitigate inflation.
Position the U.S. energy sector as a bulwark against geopolitical and market volatility.
In an uncertain world, policy shifts matter more than forecasts. While tomorrow remains unknowable, the tools for stability are already within reach.
In short, don't bet against the mandate. They have the tools they need.
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