The war in Iran has underscored an economic truth: Higher energy prices are a killer.
The war’s disruption of shipping through the Strait of Hormuz sent oil futures soaring, pushing U.S. gas prices to an average of $4.15 as of April 10. As we approach summer, higher energy prices could hit even harder as people need to cool their homes.
President Donald Trump has made it a priority to expand American energy exploration and domestic drilling. It’s time now to double down on these commitments and bring energy prices down — even if it comes at the expense of some of his other signature policies.
Here’s the hard truth: Low energy prices are essential to a functioning economy, while tariffs are not.
Energy is a fundamental pillar of a strong country. From manufacturing to transportation, low energy prices ease inflation, which benefits businesses, workers and consumers.
Energy touches everything from our homes to the food on our tables, from our daily commutes to the vacations we take. When energy prices soar, just about everything becomes more expensive.
This is why the plan to increase domestic energy production is so important. Compensating for lost supply will help meet demand and bring down prices.
This is a far better idea than more tariffs, which have a far more checkered record. Tariffs are often presented as a cost-free tool to protect American jobs. As economist Milton Friedman famously observed, there is no such thing as a free lunch. In fact, tariffs do not eliminate costs; they shift them. Those costs are passed on to consumers through higher prices.
A study by the Tax Foundation found that recent tariffs have hiked the costs of basic goods by double digits — clothing prices have spiked by 17.5 percent, building materials by 10.5 percent and furniture by 7.4 percent.
Tariffs have driven up energy prices, too, squeezing everyone in the process. Just look at the textile industry, where energy costs are devastating jobs and the economy. There’s one company in particular that illustrates this better than anything.
North Carolina’s Parkdale Mills is one of the country’s historic textile manufacturers. Anderson Warlick, the company’s CEO, has championed the president’s tariff policy, proclaiming, “This forward-looking approach supports investment, protects jobs and reinforces the integrated regional production model that has kept our industry strong for decades.”
Earlier in the year, however, Parkdale Mills shut their doors, blaming not foreign competition but rising energy costs.
In announcing the closure of its facility in Stokes County, North Carolina, and layoffs affecting 70 workers, Parkdale cited energy costs that had created an “unsustainable business model.” A separate notice tied additional layoffs in Hillsville to a “declining economic environment created by rapidly rising energy costs.”
Despite tariff protections being in place, Parkdale Mills could not overcome the burden of high electricity and fuel prices. This shows how important it is to keep energy costs low.
If we’re going to stop more Parkdale Mills from closing, we need to act. A letter by a coalition of expert groups warns that the United States is facing a growing energy emergency driven by years of policy decisions that prioritized climate goals over reliability and affordability.
“The energy emergency and grid crisis our country faces is the inevitable result of … energy policy that favored climate change concerns over reliable and affordable electricity,” the coalition’s letter says, adding that the country is now at risk of “massive utility hikes and energy blackouts” without urgent corrective action.
Energy is the central nervous system of the American economy. Every consumer, every worker, and every business will feel it if energy prices continue to rise.
Policymakers can raise barriers and hope to shield select industries or they can lower costs and empower the entire economy. One approach redistributes pain. The other creates growth.
Only one of them works.
Brett M. Decker is an endowed chair of leadership at Northwood University. He wrote this for InsideSources.com.
