Tariffs, AI demand and warmer weather drive energy rates up for Texas business owners

For a long time, business owners were used to having electricity rates are at their lowest in the winter months. Within the last several years, renewable energy reliance to meet high power demand in Texas has increased significantly causing a shift in how energy is traded.

Our team at Fourth Day Energy is on a mission to keep business owners informed on how changes in policy and the fast growing/changing economy in Texas, specifically, is impacting their energy costs.

Here's a quick breakdown on the latest in regard to why we're seeing commercial and residential electricity rates increasing in Texas:

Tariffs on Steel and Aluminum

• President Trump plans to impose new tariffs on aluminum and steel imports.

• Similar tariffs were previously announced for China, Mexico, and Canada, though Mexico and Canada’s tariffs are on hold.

Impact of Tariffs on Energy Trade

• Tariffs on Mexico and Canada were set at 25% (except 10% for Canada’s energy sector).

• The U.S. imports over 4 million barrels of crude oil per day from Canada, so a high tariff would cause major problems.

• Before Mexico and Canada's tariffs were paused, the market saw a significant gain in now and future starts for energy.

• Expect to see anywhere from a quarter to half cent increase in energy prices if the tariffs resume

Tariffs on China

• The U.S. imposed a 10% tariff on China.

• China responded with its own 10% tariff on U.S. energy imports.

• This hasn't had a strong effect on the market since China only gets about 2% of its oil from the U.S.. Nonetheless, energy rates did move up just slightly at this news.

Sanctions on Russia and Iran

• Russian sanctions (applied before President Biden left office) haven’t stopped Russia from selling oil.

• Russia avoids sanctions by using non-sanctioned ships or selling oil below a price cap.

• Iranian sanctions are being tightened, and about 500,000 barrels per day of Iranian oil could be removed from the market.

• Too many sanctions could lead to higher gas prices, which will lead to higher energy rates since gas still has a great influence on energy costs

More Tariffs Coming?

• More tariffs are expected soon, including tariffs on the EU.

• The oil and gas industry could be indirectly affected because the U.S. imports a lot of steel and aluminum used in pipelines and drilling equipment.

What are our energy experts' thoughts and how will this affect electricity rates for Texas business owners?

1. Higher Costs for Energy Infrastructure

   
   

   • Steel and aluminum tariffs would increase the cost of building and maintaining power plants, wind turbines, and transmission lines.

   • This should lead to higher electricity prices over time. - Whether it's through TDSP charges or energy rates themselves

   
   

2. Natural Gas Prices Could Rise

   • Despite our increasing reliance on renewable energy to meet high power demand, Texas still relies heavily on natural gas for electricity

   • If sanctions on Russia and Iran tighten supply, natural gas prices could go up, making electricity more expensive for business owners who are waiting to see how the market reacts

   
   

3. Volatility in Wholesale Electricity Markets

   • Any increase in fuel costs (natural gas, oil) could lead to spikes in wholesale electricity rates.

   • Index electricity plans are not worth the risk for the little that your business could save. There are few exceptions to this, so it's highly recommended to reach out to an experienced energy broker to help mitigate your risk and exposure to the energy market's significant volatility

   
   

4. Uncertainty for Business Owners

   • Businesses with fixed-rate electricity contracts may not see immediate effects if they have a plan that is structured correctly.

   • Businesses on variable-rate plans will see higher bills if energy costs rise which we believe there is sufficient reason to believe that's where we're headed in the next couple of years

   • Long-term, these tariffs could make future contracts more expensive.

Final thoughts

Fixed rate plans are an excellent way to control operating costs and limit exposure to a volatile energy market. Working with a member at Fourth Day Energy gives you the ability to work on your renewal rate months to years in advance to secure your rate.

We believe that every energy order should be examined by a professional to confirm that you're getting the lowest energy rate possible that keeps you and your business protected from energy spikes due to natural disasters (Winter Storm Uri, we're talking specifically about you.)

Everything seems to be getting more expensive these days, don't let your energy bill be another increasing expense. Call or email us today at info@fourthdayenergy.com