Trump 2.0 and the Commodity Cycle: Production Surge, Price Pressure, and Political Friction

The core macro driver of the current commodity cycle is the Trump administration's aggressive push to unleash domestic energy. On Day One, President Trump signed an executive order directing the Energy Department to end the Biden LNG export ban and rolling back a wide array of regulations. The goal was clear: to transform the U.S. into a global energy leader by removing what the administration calls "ideologically motivated regulations" that have "impeded the development of these resources."

The policy has successfully ignited a production surge. The U.S. now produces 24.2 million barrels per day of oil, a figure that positions the nation as the world's top producer. This output surpasses the combined production of Saudi Arabia and Russia. Similarly, natural gas output has hit a record 108 billion cubic feet per day. This unprecedented expansion in supply is the primary engine driving the current price cycle.

The immediate effect has been a powerful deflationary pressure on wholesale energy costs. The surge in domestic supply, coupled with the reversal of the LNG export ban, has flooded the market. This dynamic is reflected in the data, with crude oil prices nearly touching a five-year low in 2025. Lower oil prices have translated directly to consumer savings, with gas prices averaging about $2.80 per gallon at one point. The administration frames this as a victory for affordability and energy security.

Yet this production-led price cycle introduces significant friction that could constrain its sustainability. The very policies that boosted output-deregulation and permitting acceleration-have also heightened political and economic tensions. The rapid expansion of fossil fuel infrastructure, particularly in sensitive regions, has drawn opposition and legal challenges. Furthermore, the price collapse itself creates a dilemma for producers, potentially dampening future investment in the very supply that fuels the cycle. The administration's focus on short-term price relief through supply expansion may be trading long-term market stability for immediate gains.

The Divergence: Wholesale Prices vs. Consumer Bills

The administration's policy success in boosting domestic production has created a stark and politically charged divergence. While wholesale energy costs have plummeted, the financial burden on American households has surged. This disconnect is the central tension of the current cycle.

Record output has driven down the price of gasoline to a 5-year low averaging about $2.80 per gallon. This is the direct result of the U.S. producing 24.2 million barrels per day of oil and a record 108 billion cubic feet per day of natural gas. The policy goal of energy dominance is delivering on its promise of lower wholesale prices.

Yet, this same policy agenda is simultaneously pushing up consumer bills. The administration's aggressive promotion of Liquified Natural Gas (LNG) exports has redirected a significant portion of domestic supply overseas. The impact on families has been severe: in the first nine months of Trump's second term, American families paid $12 billion more for natural gas than a year earlier. This surge in spending is a direct consequence of policies that prioritize export capacity over domestic supply security.

The political friction is most visible in regions where cold weather strains the grid. On Long Island, customers are seeing their electricity costs increase by 13% during record cold temperatures. This spike illustrates the vulnerability created by the administration's actions, including the halt to all offshore wind projects that could have added affordable, reliable power. The result is a painful trade-off: lower wholesale prices for some goods and fuels, but higher and more volatile bills for families, especially during peak demand.

The bottom line is that the macro cycle of supply-driven price deflation is being actively countered by policy-driven supply constraints at the consumer level. While the U.S. produces more than ever, the direction of that production-outward for export and away from domestic infrastructure investment-is creating a new layer of cost pressure that undermines the affordability narrative.

The Permitting and Political Cycle

The legislative battle over infrastructure permitting reveals the deep political fractures that now define energy policy. In December, the House passed the SPEED Act, a significant step toward reducing the level of environmental review required to build critical projects under the National Environmental Policy Act (NEPA). This move was framed as a bipartisan effort to tackle a major barrier to development. Yet the bill's passage was poisoned by a last-minute amendment that exempted offshore wind projects from the reforms.

This amendment fractured Democratic support. Key Democrats walked away from negotiations after conservative Republicans added the carve-out, which they framed as a response to the Trump administration's suspension of work on five large-scale offshore wind projects on the East Coast. For many Democrats, the exemption was not a compromise but a political weapon. As Rep. Scott Peters noted, the bill that was once seen as "progress" became a tool for the administration to run "political interference" against renewable energy. The result was a narrow, partisan victory for the bill's core permitting reforms, undermining its potential as a true bipartisan breakthrough.

This episode reflects a broader and more troubling trend. The types of legislative reforms once negotiated in bipartisan energy policy bills are now being decided by hyperpartisan budget reconciliation legislation, like the Biden-era Inflation Reduction Act. This shift has made long-term policy stability increasingly uncertain. When major energy initiatives are tied to contentious budget votes, they become vulnerable to the same partisan swings that have paralyzed other areas of governance. The current cycle of permitting reform is caught between a recognition of the nation's energy supply and affordability crisis and the deep polarization that makes durable, cross-aisle agreements nearly impossible.

The bottom line is that while the SPEED Act passed, its legacy is one of division, not resolution. It shows how a single amendment can unravel a bipartisan effort, and how the very process of reform is now a battleground for political points. For the commodity cycle, this means the long-term supply growth that depends on new pipelines, power plants, and transmission lines faces a future of legislative uncertainty. The path to stable, expanded infrastructure is no longer paved by consensus but by the volatile terrain of partisan budget fights.

Catalysts and Risks: The Path Forward

The trajectory of the current commodity cycle now hinges on a delicate balancing act. The primary catalyst for continued price pressure is the pace of permitting reform legislation, most notably the recently passed SPEED Act. By reducing the level of environmental review required for infrastructure projects, this law aims to accelerate the development of pipelines, power plants, and transmission lines. If implemented effectively, it could further boost supply and keep wholesale energy costs subdued. Yet the major risk is a powerful political backlash from the very consumers the administration promised to help. The data on rising bills is stark: in the first nine months of 2025, American families paid $12 billion more for natural gas than a year earlier. On Long Island, customers are seeing their electricity costs increase by 13% during record cold temperatures. This disconnect between lower wholesale prices and higher household budgets is a direct result of policies that prioritize export capacity over domestic supply security.

The long-term path forward depends on whether the administration can maintain its aggressive production growth while mitigating this consumer cost impact. The current cycle is defined by a policy-driven supply surge that has already pushed prices to multi-year lows. The next phase will be determined by political will. The SPEED Act's passage, though narrow and fractured, shows that there is legislative momentum for reform. However, the episode also revealed how easily bipartisan progress can be derailed by a single amendment, highlighting the deep polarization that now governs energy policy. The risk is that as consumer bills rise, the political capital supporting deregulation and export expansion will erode. The cycle's sustainability is therefore not just an economic question, but a political one, dependent on the administration's ability to manage this friction before it sparks a broader policy reversal.