Energy Notes 10/04: Trump Blinks On Tariff Talk And A Heatwave In India

In a day of fast-moving developments, US President Donald Trump announced a 90-day pause on reciprocal tariffs imposed on America’s trade partners — with one major exception: China. Trump has threatened to slap a further 125% tariff on the country, signaling that tensions with Beijing are far from over.

Oil prices, which had plunged following the initial tariff news, rebounded sharply. Brent crude rose 5% to $66 a barrel, closing at $65.48. West Texas Intermediate (WTI) hit a high of $63.33 before settling at $61.99.

Last week’s tariff announcement had triggered fears of a full-blown global trade war, sending equity markets tumbling and oil prices to four-year lows. Both Brent and WTI dropped below $60 — their weakest levels since 2021 — as Trump’s rhetoric escalated.

But the current market bounce could be short-lived. Most exports to the US will still face a 10% levy, pushing the country’s effective import tax rate to nearly 20% — its highest in a century. Some goods, like automobiles, face even steeper duties of 25%. And China, which runs a $300 billion trade surplus with the US and is the second-biggest holder of US debt, remains squarely in Washington’s crosshairs.

Tensions between the world’s top two economies threaten to send shockwaves through global markets. Slower trade could crimp global growth and push the world closer to recession — and energy demand would take a hit.

So far, energy products have been largely spared from the worst of Trump’s tariff blitz. But weaker growth typically leads to lower consumption and less cross-border trade, dragging down overall energy demand. Adding to the pressure: rising oil inventories and a planned production increase from OPEC that will add to the glut in oil markets and further depress prices.

For India, oil price swings are a mixed bag. Cheaper crude eases the import bill, helping growth goals. But prolonged volatility — or worsening geopolitical tensions — could complicate India’s neutral stance between key energy partners like the US and Russia, and threaten stable energy access.

Back Home, Peak Demand Surges With Heat

A heatwave has gripped northern and western India. As temperatures soar, politicians are fainting and power demand is soaring. Peak electricity use is spiking.

India’s power demand has tripled over the past two decades. While renewable energy capacity has grown rapidly, fossil fuels still meet the bulk of the country’s energy needs — especially during extreme weather events. Recent research confirms that heatwaves increase reliance on conventional fossil fuel power sources.

Peak power demand hit 250 GW last May and is projected to reach 270 GW this year. Analysts expect peak loads to grow at a compound rate of 11% annually. With temperatures steadily rising, demand pressures will only intensify.

Meeting that peak load isn’t easy. Renewables, though cleaner, are intermittent and weather-dependent. Transmission infrastructure connecting solar and wind to demand centers is also still underdeveloped. Coal, on the other hand, is abundant, cheap, and easier to ramp up — making it the default choice for managing spikes.

Coal India Ltd. is planning more coal-fired power plants to meet these surges, a move that could jeopardize India’s decarbonization goals. And that’s not the only hurdle. According to the Financial Express, 18 transmission projects by Power Grid Corporation of India were delayed by an average of 32 months. The Electric Power Transmission Association warned that such delays could render new plants “ineffective,” since electricity can’t be efficiently moved across regions — especially when demand peaks.