The Role of Energy in the American Economy: Jonathan Williams on American Radio Journal

The future of the American economy will be determined in no small part by energy. Not merely energy in the abstract, but energy that is abundant, affordable, and reliable. These are not slogans; they are prerequisites for success. It is the states that increasingly shape the policies that will determine whether those prerequisites are met.

In the new 2026 Energy Affordability Report from the American Legislative Exchange Council, we illustrate a reality often obscured by rhetoric: policy choices have consequences. Some states have chosen to facilitate energy abundance; others have chosen to restrict it. The results are neither subtle nor surprising.

Where policymakers have prioritized free markets, supply, and regulatory restraint, energy remains relatively inexpensive. These states tend to attract businesses, support expanding populations, and leave more income in the hands of their residents. Where policymakers have instead imposed mandates, restricted conventional energy sources, and layered taxes and other costs onto energy providers, the opposite occurs. Higher energy prices are not accidents; they are outcomes.

This distinction has taken on new urgency. For years, electricity demand in the United States grew slowly enough to avoid serious strain on the system. That era is over. Since 2020, demand has grown closer to 1.7% per year, and some projections suggest it could reach 3% annually through 2040. However one interprets these figures, the implication is clear: more electricity will be needed—and soon. Whether it remains affordable largely depends on policymakers and, ultimately, informed Americans.

The disparities among states are already striking. California has the highest retail electricity rates in the continental United States, averaging around 27 cents per kilowatt-hour. Several Northeastern states follow closely behind, including Connecticut and Rhode Island, where rates approach 24 cents. These are not resource-poor jurisdictions; their high costs reflect policy decisions that constrain supply and impose additional burdens on energy production and distribution.

By contrast, states that have taken a different approach demonstrate what is possible. North Dakota, for example, has average electricity prices of roughly eight cents per kilowatt-hour—less than one-third of California’s. Louisiana and Nebraska follow closely at about nine cents. These differences are not marginal; they represent a doubling or tripling of costs borne by households and businesses in higher-cost states.

Such outcomes do not arise in a vacuum. Policies such as cap-and-trade systems, renewable portfolio standards, Green New Deal-style carbon taxes, and similar measures shift costs in ways that are often politically attractive but economically consequential. States with lower costs have generally avoided these approaches. Instead, they emphasize reliability and the expansion of generation capacity.

Affordability and reliability are not luxuries to be pursued after other goals; they are the foundation upon which those goals depend. On that point, the ALEC model Affordable, Reliable, and Clean Energy Security Act is increasingly popular with forward-looking policymakers seeking to enhance common-sense energy policy in their states.

Energy affordability extends beyond electricity. Transportation costs, driven largely by gasoline and diesel prices, permeate the entire economy. States such as Oklahoma, Mississippi, Louisiana, and Texas maintain some of the lowest fuel prices in the country. Here again, the contrast with California is instructive. Gasoline prices there are substantially higher than in most states. A significant portion of California’s prices, about 27%, consists of state-imposed taxes and fees. Regulation further compounds the effect.

The recent closure of refineries in the Los Angeles and San Francisco areas will reduce in-state refining capacity by an estimated 17% within months. As supply tightens, the state must rely more heavily on imported fuel, increasing transportation costs and, ultimately, prices at the pump.

None of this is mysterious. It is the predictable result of decisions made over time. Policies that restrict supply, increase costs, or discourage investment tend to produce more expensive energy. Policies that do the opposite tend to produce less expensive energy.

The broader implication is difficult to avoid. Energy is not merely another sector of the economy; it is an input into nearly every other sector. When its cost rises, those increases ripple outward. When it remains affordable, the benefits do as well. States that recognize this have positioned themselves for growth. Those that do not may find that their policies, however well-intentioned, impose costs that extend far beyond the energy sector itself.

In the years ahead, as demand continues to rise and pressures mount, these differences are likely to become even more pronounced. The laws of economics have not been repealed. They will continue to operate, whether acknowledged or not.