In less than a month from now President elect Trump will be President Trump and then the buck stops with him. On the campaign trail he made many promises, some will be examined, some will be worked on, some will be done, and some will fail. Often times the more specific the promise, the harder it will be to say he has done it. As with every government, there will be good things with the government and there will disasters and something in-between. As investors you have to try to figure out how the government will affect your investments.

In an article by Lisa Friedman of The New York Times News Service, one of the specific promises President-elect Trump made would be to cut electricity prices in half within 18 months of taking offices.

That type of policy would have an effect on electricity utilities who are some of the best dividend companies in the market. Utility companies are regulated and every year go before a government agency in charge of pricing and policy for the companies. Often the utility companies will say our costs are X, we expect to capital costs of Y and we need an increase of Z. The regulatory board goes through the numbers and determines the new electricity rate for consumers. Will they cut it half? highly unlikely.

The Trump administration says they can lower prices by boosting oil and gas production, which is already at record levels in the US. President Trump plans to approve new drilling projects (releasing more federal lands for drilling), approve more pipelines and get rid of environment protection regulations that the industry says increases costs.

Industry experts do not see prices being lowered, unless the economy goes into a recession or is shut down similar to COVID. (Given the appointments, it is not likely the Trump administration will shut down the economy).

Ed Hirs, an energy economist at the University of Houston does not believe prices will be lower.

Most energy analysts agree if supply increases, it is possible for prices to drop but the US is part of well-integrated oil market, and the no 1 factor that drives prices is global conditions.

If it did, Edmund Crooks, vice chair of the America for Wood Mackenzie, an energy consulting company said that would invite different problems. Getting the price low would make it unprofitable for energy companies to drill. Energy companies would shut down production till prices rise.

Linking to dividend paying stocks, for companies that are based on a commodity the important element is what does the cost of product need to be to ensure a profit? Commodity companies are based on supply and demand and when one changes the price moves up and down. Unless President Trump plans to subsidize consumers, which his party does not like, it is hard to imagine prices falling in half and energy companies making profits.

There are more questions than answers, till next time – to raising questions.