What even is a national energy emergency?

Summary

Marketplace Morning Report: “What Even Is a National Energy Emergency?” – January 22, 2025

In the January 22, 2025 episode of Marketplace Morning Report, host David Brancaccio delves into a range of pressing economic and business topics, from the U.S. stock market’s performance amid political actions to significant investments in artificial intelligence infrastructure. The episode culminates with an in-depth discussion on President Donald Trump’s unprecedented declaration of a national energy emergency, exploring its implications and the controversies surrounding it.

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Stock Market Surge Amid Tariff Speculations

Assessing Market Performance

The episode opens with an overview of the U.S. stock market's encouraging start to the year. David Brancaccio notes that the S&P 500 has risen by 2.6%, a strong performance given that only 12 trading sessions have occurred since New Year's Day. The Dow Jones Industrial Average has increased by 70 points (2.10%), and the Nasdaq is up by 1.2% today. This uptick is attributed to robust quarterly profit reports from major companies and optimism that anticipated import taxes on China might be delayed.

Tariffs as a Strategic Tool

Susan Schmidt, portfolio manager at Exchange Capital Resources, provides insights into investor behavior regarding potential tariffs. She explains that leaders from the Economic Forum in Davos are viewing tariffs not merely as negative trade barriers but as “a bargaining tool” that could “bring manufacturing back into the US” (00:50). This perspective suggests that the administration’s delay in implementing tariffs until February 1st allows for extended negotiations, potentially benefiting businesses by avoiding immediate disruptions.

Consumer Spending and Corporate Earnings

Further bolstering the market's strength are recent earnings reports from significant companies. Susan Schmidt highlights that firms like Netflix, United Airlines, and Procter & Gamble have surpassed expectations in both earnings and revenue, primarily driven by strong consumer spending (01:45). Notably, Netflix’s stock has surged by 13%, reflecting investor confidence in the company’s performance.

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Massive Investments in Artificial Intelligence Infrastructure

Stargate Project Announcement

A notable segment features the revelation of the Stargate Project, a collaboration between OpenAI and SoftBank, aimed at building extensive data centers to support artificial intelligence advancements (02:13). Announced by President Trump, this initiative is projected to require an initial investment of $100 billion, potentially expanding to $500 billion over four years (02:35).

Skepticism and Hidden Details

Nova Safos raises critical questions about the Stargate Project, pointing out that there is limited information available beyond the construction of a single site in Texas (03:22). He recalls a similar announcement made by SoftBank’s Masayoshi Son in March of the previous year, suggesting that the current declaration may not bring substantial new developments (03:22). This lack of transparency has led to skepticism regarding the project's actual progress and viability.

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President Trump’s National Energy Emergency Declaration

Understanding the Declaration

The core of the episode centers on President Trump’s declaration of a national energy emergency, a first in U.S. history. Kaylee Wells from Marketplace explains that this declaration is intended to “streamline permitting for traditional energy infrastructure”, particularly focusing on fossil fuel production (04:54). Additionally, it seeks to "weaken some of the environmental regulations" that currently hinder fossil fuel development and to “provide relief at the gas pump” if gasoline prices rise (05:06).

Industry Pushback and Renewable Energy Concerns

Heather O'Neill, leader of the clean energy group Advanced Energy United, voices strong opposition to the declaration. She criticizes the administration for overlooking renewable energy resources such as solar and wind, which have demonstrated significant growth and reliability in recent years (05:24). O'Neill emphasizes the importance of utilizing all available energy sources to address the country’s energy needs effectively (05:46).

Economic Realities and Policy Implications

Rob Gramlich, president of Grid Strategies, challenges the necessity of labeling the situation as an emergency. He points out that the U.S. is experiencing record levels of oil and gas production and that the bulk power system remains robust (06:20). Gramlich suggests that the emergency declaration is more a strategy to expedite energy policy initiatives rather than a response to an actual crisis (06:43). This sentiment is echoed by his observation that the declaration serves as an “intent to act” and a directive for agencies to leverage existing statutory powers (06:49).

Executive Orders and Policy Acceleration

Kaylee Wells connects the energy emergency declaration to President Trump’s broader pattern of using executive orders to implement policy changes swiftly. She notes that Trump signed 26 executive orders on his first day in office alone, highlighting his preference for unilateral action to achieve administrative goals (07:02).

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Conclusion

The episode of Marketplace Morning Report adeptly navigates through the complexities of current economic indicators, corporate performances, and significant policy decisions. The discussion on the national energy emergency declaration underscores the tension between traditional energy interests and the burgeoning renewable sector, illustrating the intricate balance policymakers must strike. With insights from industry experts and detailed analysis, the report provides listeners with a comprehensive understanding of the multifaceted issues shaping today’s business and economic landscape.

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Notable Quotes:

• Susan Schmidt on Tariffs as a Bargaining Tool: “Tariffs can be used as a bargaining tool. Instead of tariffs being negative, where they think it might be positive. Is that bargaining tool bringing manufacturing back into the US” (00:50).

• Heather O'Neill on Energy Resources: “If this is an emergency, why aren't we using all the tools in the toolbox, particularly the ones that have been proving themselves out over the past handful of years as they've come onto the grid?” (05:46).

• Rob Gramlich on the Emergency Declaration: “The actual emergency declaration looks to me more like an intent to act and a directive for agencies to find statutory levers they can pull.” (06:49).

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This comprehensive summary encapsulates the key discussions and insights from the episode, providing listeners with a clear and detailed overview without the need to tune in.

Transcript

[David Brancaccio]

The administration focuses on farming computer data farming. I'm David Brancaccio. First published reports say the Trump administration intends hopes to expects to raise China tariffs by 10%, possibly in February, but again, no new tariffs yet. As of now, The S&P 500 is up 2.6% year so far, a solid showing given they've only completed 12 trading sessions since New Year's. Right now the S and P is up half a percent. The Dow is up 70 points 2, 10%. The Nasdaq is up 1.2% today. The bounce can be traced to quarterly profit reports that are coming out about fall into winter. And this sense this morning at least, that those import taxes won't happen all at once. Susan Schmidt is portfolio manager at Exchange Capital Resources.

[Susan Schmidt]

This is where investors are starting to pick up on what tariffs could potentially mean. We've heard some comments from big CEOs out of the Economic Forum in Davos, Switzerland. That's happening right now. And they're picking up on the fact that tariffs can be used as a bargaining tool. Instead of tariffs being negative, where they think it might be positive. Is that bargaining tool bringing manufacturing back into the US So while we've been talking about tariffs, immediate implementation, now it's being pushed back to February 1st. And that leads to more discussions and potentially more negotiation between now and then, which could be really good for business.

[David Brancaccio]

All right. And I did the calculation. The S&P 500 is up 2.6% for the year. I mean, the year's only about 12 or 13 trading days so far, but that's a pretty good showing for essentially a couple of days. Where's the strength coming from as all these companies come out with their profit reports?

[Susan Schmidt]

That is a good showing and that's a lot of sentiment around the election and potential policies from the Trump administration. But the market is seeing companies report earnings. We've seen strength in the consumer just last night and this morning we've heard from Netflix, United Airlines, P and G. All of those companies continue to talk about better than expected earnings, better than expected revenues. And that's all because spending from the consumer has been so strong.

[David Brancaccio]

Netflix Stock is up 13% right now. A group of tech companies has announced plans to spend big on computer farms to power artificial intelligence. Half a trillion dollars is the four year price tag, says President Donald Trump, who announced a venture called Stargate. Now the huge server farm upgrade may sound familiar. Marketplaces, Nova, Safos here with more.

[Nova Safos]

Well, David, let's start with the two big names involved in this venture OpenAI, the ChatGPT maker, and SoftBank, the Japanese investment firm led by Masayoshi Son, who's become a prominent Trump backer. And the crux of what they're announcing is the formation of a new company called the Stargate project, which will build out a number of data centers to power artificial intelligence for OpenAI. Now, right now it uses Microsoft's infrastructure and OpenAI says these new data centers will complement Microsoft's. We've been hearing a lot of these data center announcements. Of course, in this case, the initial investment is set to be $100 billion and could grow could to five times that amount throughout Trump's second term.

[David Brancaccio]

Nova, we tracked the fine print here. What's the fine print on this?

[Nova Safos]

Well, funny you should ask because there were few details in this announcement other than that there's one site already under construction in Texas. And that begs the question of how much of this announcement is actually new. A reminder that it was just a month ago that SoftBank's Masayoshi son stood with then President Elect Trump and announced plans for $100 billion in new investments. And we've heard the term Stargate before too, David. That was as early as March of last year. So, yeah, a lot more questions than ANSW right now.

[Phoebe]

Hi, this is Phoebe in Honolulu, Hawaii. The economy shapes our lives and Marketplace helps me keep up with that force without getting bogged down in bad news. I also appreciate their focus on gender and racial inequity and on climate change. And I love the growth that stories about drivers of our economy other than consumption. Join me in supporting Marketplace with a gift today. Go to marketplace.org donate.

[David Brancaccio]

Some context now on the president declaring a national energy emergency, which gives the government extra authority. But an energy emergency declaration is a first. Here's Marketplace's Kaylee Wells.

[Kaylee Wells]

An energy emergency declaration might be unprecedented, but the end goals are not. Partner David Cherney at PA Consulting Group says it's designed to do three things.

[David Cherney]

One is streamline the permitting for traditional energy infrastructure, particularly fossil fuel production.

[Kaylee Wells]

Two is weakening some of the environmental regulations that hinder fossil fuel production.

[David Cherney]

And then three is finding measures to help provide some relief at the gas pump if gasoline prices increase over over time.

[Kaylee Wells]

Those first two goals are especially frustrating to Heather O'Neill, who leads the clean energy industry group Advanced Energy United.

[Heather O'Neill]

It's unfortunate that there's a whole set of energy resources that aren't mentioned, and that includes solar and wind to name two.

[Kaylee Wells]

O'Neill says the US does have energy concerns. Increased electricity demand, old infrastructure that needs updating, worsening extreme weather that makes our grid vulnerable.

[Heather O'Neill]

If this is an emergency, why aren't we using all the tools in the toolbox, particularly the ones that have been proving themselves out over the past handful of years as they've come onto the grid?

[Kaylee Wells]

Solar energy, for example, increased nearly Eightfold in the past decade on that third goal about gas prices. Right now there's a big global supply of oil and not as much demand, so prices aren't that bad. Rob Gramlich is president of the power consulting firm Grid Strategies, and he says that's just one factor that makes this emergency claim dubious.

[Rob Gramlich]

It's hard to really claim we're in an emergency when we're experiencing record levels of oil and gas production and lots.

[Kaylee Wells]

Of success on expanding electric power, too.

[Rob Gramlich]

We have all kinds of electric generators that are clamoring to already join the system and provide power, and our bulk power system is still among the best in the world.

[Kaylee Wells]

Instead, Gramlich says, it's more of a means to get some energy policy work done quickly.

[Rob Gramlich]

The actual emergency declaration looks to me more like an intent to act and a directive for agencies to find statutory levers they can pull.

[Kaylee Wells]

And it adds up with Trump's liberal use of executive orders. On his first day in office alone, he signed 26 of them. I'm Kaylee Wells for Marketplace.

[David Brancaccio]

And I'm David Brancaccio. You're listening to the Marketplace Morning report from apm, American Public Media.

[Kai]

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