MORGANTOWN, W.Va. – The Trump administration plan to lower prices and unleash American energy could have an effect on grocery store prices before reducing inflation. By using executive action to declare a national energy emergency, federal agencies can use various emergency authorities to facilitate the identification, leasing, siting, production, transportation, refining, and generation of domestic energy resources.
On WAJR’s Talk of the Town,” West Virginia University Director, Bureau of Business and Economic Research John Deskins said in theory more energy should lower market prices, but the American economy is so large and complex that just one factor is not likely to make a big difference.
“Energy for sure is an important driver of inflation; there are many other drivers, but energy is an important driver,” Deskins said. “If Trump’s policies are successful in lowering energy prices, that could have an important effect on inflation.”
A reduction of gas and diesel prices could have the biggest positive effect on sectors of the economy. Lower gas and diesel prices would immediately impact the bottom line costs to producers and shippers that could be passed on to consumers.
“More importantly, gasoline is an input into the production of every good in the economy,” Deskins said. “Manufacturing processes use energy, of course, and all goods must be trucked somewhere.”
Deskins said the policies would be more durable if they had the backing of lawmakers in Washington. But, he said that will be a difficult task that would not likely operate at the same speed as business is accustomed to.
“Congress isn’t known for being especially efficient or fast,” Deskins said. “So, I don’t know how long it will take for Trump policies to be enacted.”
Deskins said long-term energy investment decisions are made very deliberately and are part of the overall operating strategy of a business. If federal government changes are on the existing path of a company strategy, it’s feasible to expand, but companies are not likely to make major changes because the federal government has changed policy.
“It takes time to invest in the infrastructure and to put these energy investments in place,” Deskins said. “Even if the policies pass tomorrow, I’m not sure how long it would be until energy prices actually fall.”