Daily on Energy: Energy soars in CPI, Trump to China, and Big Oil loves Alaska

ENERGY AND ELECTRICITY PRICES SOAR: Electricity prices and energy prices overall soared last month, well outpacing inflation, driven by global disruptions from the Iran war. 

The details: The Bureau of Labor Statistics released the latest update to its Consumer Price Index this morning, revealing that inflation rose five-tenths of a percentage point to 3.8% for the year ending in April. Energy prices surged faster than that, increasing by 17.9% for the year. Month-over-month, broad energy prices increased by 3.8%. 

Fuel oil prices saw the largest increase, jumping up an immense 54.3% for the year ending in April, up 5.8% from the month before. Gasoline prices also saw a significant increase of 28.4%, increasing 5.4% month-over-month. 

Electricity prices are also still on an upward trend, jumping 6.1% year-over-year. Compared to March, electricity prices increased just 2.1%. 

The only energy service or commodity to see a monthly decrease was utility (piped) gas service, falling by 0.1%. All energy services and commodities increased for the year ending in April. 

Related…EIA warns gasoline will hover around $4 this year: The Energy Department’s Energy Information Administration has cast doubt on whether gasoline prices will fall below $3 a gallon later this year once, and if, the Strait of Hormuz reopens. 

In its latest short-term energy outlook, the EIA forecast that the average price of gasoline will sit at $3.88 per gallon by the end of this year. The agency is only expecting this to drop slightly in 2027, falling to an average of $3.62 per gallon. 

The EIA also is projecting residential electricity prices will rise by around 5% this year, and continue to increase throughout 2027. The agency expects the largest price hikes to be seen along the East Coast. 

While the EIA said next year’s increases will be at a “slower rate,” continued price hikes will very likely become a sticking point for the Trump administration ahead of the 2028 presidential election, as President Donald Trump vowed to slash prices in half during his campaign. 

WHERE PRICES STAND: Oil and gas prices remain elevated today as hopes for a ceasefire deal between Iran and the United States fizzle out. 

Around 2:30 p.m. EDT, international and domestic benchmarks were both above $100, rising by more than 3%. Brent Crude jumped by 3.65% and was priced at $108 per barrel, while West Texas Intermediate increased 4.06%, selling at $102 a barrel. 

The national average price of gasoline currently sits at around $4.50 a gallon, just two cents lower than it was yesterday, according to AAA. The average cost of diesel, however, was recorded slightly higher than yesterday at $5.644 a gallon – less than $0.20 from the all-time record high. 

GasBuddy petroleum analyst Patrick De Haan warned earlier today that if the Strait of Hormuz fails to reopen “soon,” he imagines the national average price of gasoline will hit $5 a gallon as early as June. 

TRUMP HEADS TO CHINA: Trump is heading to China today, where he will be meeting with Chinese President Xi Jinping. The two are expected to discuss trade policy and the war in Iran. 

This will be Trump’s first visit to Beijing in his second term. China remains one of Iran’s closest allies and trading partners. The president is expected to meet with Xi on Thursday and Friday. 

Trade relations between China and the U.S. have been tense. 

Trump has imposed sweeping tariffs on Chinese products. In response, China has placed export controls on a number of rare earth elements, for which many countries rely on its supply. Late last October, the U.S. and China agreed to a one-year truce to stave off restrictions on rare earths exports for a year. The administration also reduced some tariffs on Chinese products. The two countries are expected to discuss extending this agreement.  

Reuters reported that China is expected to announce purchases of Boeing airplanes, agricultural products, and energy. In addition, Taiwan, artificial intelligence, and nuclear weapons will also be part of the discussion. 

BIG OIL CALLS ALASKA A ‘FANTASTIC OPPORTUNITY’: Two months ago, the Interior Department held a lease sale in Alaska’s National Petroleum Reserve, attracting historic bidding from major oil companies, including Shell, Repsol, and ExxonMobil. 

The details: While the increased interest came as a surprise to some – exploration and production has broadly declined in Alaska over the last few decades amid increased environmental regulations – a new Financial Times report reveals that executives see the state as critical to diversifying their portfolios and propping up the markets. 

The Trump administration’s efforts to open the state to more drilling have also coincided with the global energy crisis brought on by the war in Iran, further making Alaska attractive for increased trade with Pacific states. 

“Alaska is a fantastic opportunity,” Francisco Gea, head of upstream at Repsol, told the Financial Times. “With the imminent start-up of the Pikka project on the North Slope, the reversal in the decline of oil production in the great state of Alaska is going to help put more oil in the Pacific area at an important moment.”

Kevin Gallagher, the CEO of Australian major Santos, agreed, telling the outlet that the Middle Eastern conflict shows Alaska’s “real strategic advantage,” as it has direct routes to Japan and Korea. 

Some background: Oil production in Alaska peaked at more than 2 million barrels per day in 1988. However, production fell to 50-year lows in 2024, hitting just around 475,000 barrels per day. As majors eye new developments, Wood Mackenzie now projects that production will increase to around 750,000 barrels a day by the end of the decade. 

TotalEnergies will purchase nearly 0.85 million tonnes per annum of liquefied natural gas from Venture Global for about five years. Separately, Vitol and Venture Global agreed to increase a five-year binding LNG agreement from 1.5 MTPA to 1.7 MTPA. 

“These agreements reflect the continued confidence and trust in our ability to deliver reliable, low-cost U.S. LNG to global markets quickly and at scale as demand for energy security continues to grow,” said Venture Global CEO Mike Sabel. 

“By offering customers short-, medium-, and long-term supply options, we are providing the flexibility and certainty they need to deliver LNG where it is needed most,” Sabel added. 

NEW ZEALAND TO AMEND CLIMATE LAW: New Zealand is moving to change one of its laws to prevent courts from finding companies liable for damage caused by emissions in private lawsuits. 

The details: Reuters reported earlier today that the New Zealand government announced that it is amending its Climate Change Response Act of 2002. The changes are expected to apply to both current and future court proceedings. 

The change was prompted by one case filed by a climate change activist against six companies, which is expected to go to trial next year. The activist has claimed that the companies’ joint emissions have contributed to climate change and caused damages to his land, interests, and cultural rights, according to Reuters.

Justice Minister Paul Goldsmith said that the lawsuit was undermining confidence and investment in the businesses and that climate-related damages should not be solved in the courts. Instead, he said, it should be managed in New Zealand’s parliament, existing legislation, and the country’s Emissions Trading Scheme. 

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