A man stopped in November at a gas station in Washington, D.C. to fill his car. Natural gas prices have fallen this spring, although the fact is usually rising this time of year, mainly due to lower oil prices. This saves drivers money and reduces the cost of goods. Andrew Harnik/Getty Images North America Closed subtitles
President Trump assured that during his presidency Gasoline prices will fall and U.S. oil production will flourish.
One of them is happening.
The price of pumps has indeed fallen, mainly because the price of crude oil has fallen by nearly 25% since the beginning of January. The U.S. benchmark West Texas Intermediate fell from its peak of $80 a barrel in mid-January to less than $60 today.
But it's not because American producers are Open the pliers. In fact, the prices are low enough now that on average, American producers cannot drill new wells profitably. Latest survey data From the Federal Reserve in Dallas.
It is a breakdown of the power of oil prices burning and what it means to individuals and economics.
The widespread tariffs have raised concerns that trade barriers could slow down the global economy.
Oil demand is closely related to economic prosperity: when the economy is booming, companies are opening factories, people are buying goods and where they move forward, consumption will climb. So does oil demand when the economy is in a recession.
Although environmentalists say oil consumption must fall if the world is to meet climate goals, demand is expected to increase this year even if a trade war occurs. The problem is How many.
Analysts at research firm Rystad Energy said the extension of the trade war into 2025 could halve the expected growth in China's oil demand. Mukesh Sahdev, head of global oil commodity markets at Rystad, wrote that the tariff situation is so atypical that comparing this year with last year “has become irrelevant.”
Meanwhile, despite concerns about a decline in oil demand, production will actually rise.
Over the past few months, the oil cartel OPEC and its allies (collectively known as OPEC+) have issued a series of announcements, each of which has increased the group’s oil production. Recently, on May 3, some oil cartel members who had previously voluntarily cut production announced that they would abandon some of these cuts.
The news immediately fell in the oil market. Prior to Monday's recovery, prices hit a four-year low.
OPEC+ emphasized in a press release that its decision is based on “current healthy market fundamentals” and that, essentially, demand today remains firm despite fear of the future that has led to a decline in oil prices.
Analysts believe that it is more than that. OPEC+ member states agree to production quotas; it keeps supply limited and price high when everyone sticks. but Data display Some members of the group have exceeded these quotas. For OPEC+, this is a recurring problem; every country has the motivation to generate more momentum, even if they have less overall gains.
Ahead of the latest OPEC+ gathering, analysts at Clearview Energy Partners predict that the de facto head of OPEC+ Saudi Arabia could urge the group to raise production and lower prices to oppress Ohio Europe and OPEC+ member states, including Iraq and Kazakhstan. ”
Indeed, the group did order increased production.
Meanwhile, Trump has explicitly asked OPEC+ to produce more oil to lower prices, although it is unclear what impact may have.
The gospel to consumers and the blow to producers
Lower oil prices mean lower pump prices. Gasoline prices usually rise in the spring, but fall in April and may fall further. This means more money in the pockets of American drivers.
Lower fuel prices also lower the average commodity price because it makes shipping cheaper. Pantheon macroeconomics estimates that the recent decline in oil prices will drop title consumer prices by about 0.3% compared to elsewhere.
But the Pantheon also estimates that a nationwide crackdown on oil producers will eliminate that gain, and they will cut spending and hiring to play a role in the economy.
The United States is the world's largest oil producer. Although U.S. companies are not parties to OPEC+ negotiations, they are greatly influenced by OPEC+ decisions.
The combination of tariffs and OPEC+ production makes prices enough to hinder U.S. production. In fact, U.S. oil producer Rattlesnake Tell investors this week “Our onshore oil production is likely to have peaked and will start to decline this quarter.”
This runs against Trump’s growing vision for the U.S. oil industry, a phrase he often repetitions: “Diamond, baby, drilling.”
This has always been at the heart of the president's energy policy. The low prices he promised consumers and the prosperity of the oil companies he promised were simply incompatible.