Gasoline prices are coming down. But Trump's drill-baby-drill promises are not the reason
Gasoline prices are coming down, and President Donald Trump is happy to take credit for that. But he has little to do with it, experts say, and his policies could make it more expensive to increase domestic oil production from already record levels.
The price of a barrel of West Texas Intermediate, the benchmark used for US crude oil, is at $66.71, down 11% from the day after Trump took office. Gasoline prices haven't fallen as fast, but they are approaching $3 per gallon. The national average for a gallon of regular stands at $3.08, according to AAA, down about 2% from when Trump took office but nearly 10% from a year ago.
'A very big thing that I'm very happy with is oil is down,' he said in remarks in the Oval Office on Wednesday. 'We're getting that down. When energy comes down, prices are going to be coming down with it. So in a very short period of time, we've done a very good job.'
And the rest of the presidential administration has been eager to back up his claims, with White House senior counselor Peter Navarro saying that Trump's policies caused the price drop.
'In this case, it's 'drill, baby, drill,'' Navarro told CNN this week, using one of Trump's campaign slogans. He predicted that oil prices could fall to as low as $50 a barrel.
But the United States was already producing more oil than any other country before Trump took office. That record production level doesn't appear to be moving much higher, even with the new administration's pro-drilling policies.
The Energy Information Administration (EIA) is forecasting an average daily production of 13.5 million barrels of oil in 2025, up 200,000 barrels a day from 2024. But that pace was reached during the last three months of Joe Biden's presidency.
'The EIA is showing that production is now plateauing at the level we hit in the fourth quarter,' said independent oil analyst Andy Lipow.
The EIA's forecast for 2026 is for only a narrow increase to 13.6 million barrels a day. And even then, Lipow said, that domestic production is not the thing that's driving prices lower.
The recent drop in prices is due to a classic imbalance between supply and demand, rather than expectations for a Trump-fueled surge in domestic oil production, Lipow said. OPEC+, a group of major oil-exporting nations, announced plans earlier this month to increase production over the next 16 months. And there are signs of weak demand for oil on the horizon, especially in China, Lipow said.
But if the price of oil drops significantly, it could end up slowing production altogether, Lipow added, because American oil producers can't make a profit on oil that's too cheap for their balance sheets, let alone anywhere near Navarro's $50 price target.
'From a producer perspective, they need prices closer to $70 a barrel,' Lipow said.
Trump's promises to slash oil industry regulations could lower the price that producers need to break even, but not enough to spur production. And Wednesday's tariffs on foreign steel imports are likely to increase costs for producers, Lipow said,
'Drill baby drill is going to be offset by rising costs, especially the steel used at the oil well,' he said. Even domestic steel prices are likely to rise, as American steel companies take advantage of decreased competition. Overall US spot steel prices are up more than 30% in the last two months in anticipation of the impact of tariffs, said Phil Gibbs, steel analyst at KeyBanc.
A CNN poll released Wednesday shows a majority of Americans now disapprove of Trump's handling of the economy, and an even greater percentage say he's not doing enough to address the high prices that helped him win last year's presidential election.
Wednesday's Consumer Price Index report, the government's key measure of inflation, showed lower gas prices are helping to cool overall price pressures. But there are fears by many consumers, economists and businesses that Trump's tariff policies could spur additional price hikes soon.
Lipow said recession fears — which have been blamed for much of the recent plunge in stocks — probably aren't driving oil lower yet. That's partly because oil is traded globally, not just based on one country's demand.
But if there are signs of a slowing American economy, or the actual start of a US or global recession, that would send gasoline prices down quickly and sharply. The 2020 recession sparked by the Covid-19 pandemic as well as the Great Recession of 2008 and 2009 resulted in steep drops in gasoline prices.
'If we get the bad news that we're going into a recession, the good news would be that the national price will drop below $3 a gallon,' Lipow said.
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Donohoe: Pharma Tariffs Could Cost Ireland 75,000 Jobs
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Yahoo
19 minutes ago
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Will Tech Tariffs Slow U.S. Growth?
The tariff roller coaster rumbles on, and for American manufacturers, there's no getting off the ride anytime soon. Even with a drastic reduction in duties on China-made goods and a respite from global 'reciprocal' tariffs, the looming threat of taxes on foreign wares will continue to sow confusion. For some footwear, apparel and textile manufacturers based in the United States, tariff turmoil has been a boon to business, and for others, it's resulted in orbiting by brands and retailers that are voicing interest but aren't quite ready to pull the trigger on onshoring. The uncertainty of President Donald Trump's tariff strategy hasn't just paralyzed retail decision-makers, but the supply chain. Without clarity about the future of trade policy, manufacturers are left wondering about when to scale up—and how. More from Sourcing Journal Amazon and FedEx Continue to Up Their Game on AI-Enabled Logistics Robots AGI Denim's Apparel Park: A LEED Platinum Pioneer in Sustainable Denim Manufacturing Tariffs Stall Long Beach Imports, Marking Slowest May Since Pre-Covid Era Much of the U.S. manufacturing landscape, across sectors and applications, relies on advanced, automated technologies that take the place of cobbler's benches and traditional sewing machines. Some next-generation processes, like 3D printing, are on the verge of breaking through as production drivers in the U.S. But all of these activities, new and traditional, rely on machinery, much of which is sourced overseas and, under the current tariff regime, subject to potentially onerous duties. 'There's a combination of issues happening right now. I think uncertainty in the marketplace has stymied some orders from coming to fruition, because people are wondering how the 90-day pause will conclude,' said Kim Glas, president and CEO of the National Council of Textile Organizations (NCTO), regarding the opportunities coming to American producers. According to Glas, the rapid evolution of trade policy may be driving up interest in American manufacturing, but it's not providing any clarity for producers that are trying to understand their place in the puzzle. In the absence of a clear path forward, the textile sector is waiting until July 9—the date that the deferral of reciprocal duties concludes—to see 'what kind of market signals' will materialize. NCTO has long been supportive of holding 'trade predators' like China and Vietnam accountable for non-market activities. 'But we have also advocated, including in the first Trump administration, for a few exceptions that we think are critical,' Glas said. Access to state-of-the-art textile manufacturing equipment is necessary to help improve processes at the nation's plants, both in order to drive efficiency and cost-competitiveness. But those upsides come with a hefty price tag. 'It's very expensive,' Glas said. 'When you apply a 10-percent tariff, or another tariff differential, it can make a real difference about whether or not you can afford to reinvest in your operation,' she explained. 'When you do a big capital expenditure like that, you have to amortize those costs over a period of time.' But duty costs are paid upfront. And on a machine that costs tens, if not hundreds of thousands of dollars, even a 10-percent duty could be make-or-break for a small operation. There are significant limitations to such equipment production in the U.S., Glas explained, and the advanced machinery is essential to most modern operations. Devices used for extruding, drawing, texturing or cutting man-made textile materials aren't made stateside. Many of these technologies hail from Europe, and of course, China. Glas stressed the tightness of margins in a price-competitive industry like textiles, where companies are likely to spring for the lowest-cost option. The risk in not having access to advantageous technologies is that foreign operators will gain those capabilities, underscoring their own attractiveness. 'We have to think about this in a holistic way. If the design is to unleash more U.S. investment, we're all for that. We want to see our U.S. textile industry grow and we need the administration's help,' Glas said. 'But there is a recognition across the industry that a lot of the textile machinery is no longer made here, and will not be made here overnight. So we need to have a special dispensation for that.' The NCTO lead said exemptions for production machinery could be written into potential forthcoming trade agreements or tariff regimes, or an exclusion process could be established after tariffs are reinstated (as was the case with Trump 1.0's Section 301 duties on China). Either way, she hopes decisions surrounding solution for American manufacturers are 'expeditious.' 'The tariffs are definitely making the machinery more expensive,' Mitch Cahn, owner of Newark, N.J.-based apparel and gear manufacturer Unionwear, told Sourcing Journal. The producer, which specializes in items like baseball caps and tote bags, imported machinery earlier this year from Canada, before Trump's tariff announcements. 'We didn't make the investment because we expected tariffs, we actually made the investment to ramp up for the U.S.A.'s 250th birthday' in 2026, he said. Cahn anticipates a surge of business surrounding the occasion, along with events like the World Cup and the Olympics. According to the business owner, doubling down on automated machinery (this time, on an apparatus that sews canvas totes) was a matter of necessity. 'We were having a lot of difficulty hiring more sewers; the pool was dry,' he said. 'We had to invest in machinery to make up the gap between what we were doing and what we want to be able to do next year.' The tote bag machinery, when it's operating at full speed, will do the work of 44 people with a single operator. 'We're still ramping up; the goal is to have it probably operating 18 to 20 hours a day by the end of the year,' he said. 'We didn't do it to speed up or save money. We just did it because there was really no way for us to grow linearly—not even exponentially,' he explained. 'There's no way for us to keep adding sewers to our operation, so we need it.' These planned investments in technology aren't a bid to replace human headcount with machines—in fact, Unionwear is holding on tight to the sewers that it employs. One prevailing issue inhibiting the growth of American manufacturing is the lack of a pipeline for skilled, affordable labor. The group has plans to automate other production processes, and is in talks with American manufacturers for those projects. Since the reciprocal duties on more than 60 countries were announced, Unionwear has seen a 'considerable' increase in interest and sales, Cahn said. 'If the tariffs are here to stay, the return is actually going to be much greater than it would have been without the tariffs,' he said of the investment in new technology. 'And the reason for that—and it's something we didn't expect—is the possibility that with automation, we actually can be competitive with import prices that have tariffs on them.' Cahn said that even if the Canadian-made machinery was tariffed at the 25-percent rate that Trump originally threatened, the company still would have made the buy. 'It really opens up a much bigger market for us,' he added. 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'Of course, it tapered down' over the course of the ensuing weeks, which saw reductions in duties on China-made goods, deferrals on all reciprocal duties and a trade deal with the United Kingdom, among other trade developments. 'But out of all of this interest, we were able to create an amazing pipeline which is wired long-term, because one of our gauging questions was, 'If the tariffs get back to [what they were previously] would you still work with us?'' Koobz has decided only to take on business with partners that have a long-term plan for onshoring and budget allocated to the effort. But scaling up from 60 to 4,000 3D printers—which Graczyk said ring in at about $600 apiece—will require significant capital expenditure. While the price tag on the devices is modest, a tariff will add to it, and the group is looking to scale aggressively in a short period of time. Koobz looked into 3D printer options made outside of China, and found that the models made stateside as well as in Europe cost more and came equipped with fewer, less-advanced features. 'There are other sources than China. In Europe, there's still a handful companies that can manufacture equipment of that sophistication, at that scale—maybe not as good, maybe a little bit different architecture,' Graczyk said. But beyond price and performance, the factory owner is also looking to develop a smart and resilient supply chain, starting with machinery. One way to foster this could be to diversify sourcing for machines, but there would be differences between the units and the way they operate, as well as possible differences in quality and output. 'We are fortunate enough that we haven't pulled the trigger on any anybody yet, but we are at risk of slowing down because we would rather take more time to de-risk this as much as possible; to slow our progress instead of building while still thinking about where to source,' he said. 'We know we have to build a system which is very flexible.' Koobz is having discussions with 3D printer manufacturers about the potential of nearshoring printer production to free-trade-agreement countries like Mexico, and some are already considering doing so. 'Short-term, I'm not super worried about securing our next year's growth, because the printers that we're using for the current stage of products are already in the U.S., in distributor warehouses,' he said. 'We've already purchased some of them, so there's some frontloading of this equipment. But thinking forward, we need to add multiple colors, multiple materials—those machines are a little bit more sophisticated, and inventory of those doesn't exist.' The already-bought machines and those available onshore will float the company through to the last quarter of 2026, he believes. After that, Koobz will 'have to start solving the puzzle' of where to source the technology that powers its operations. 'Who are we going with for the next stage of building? Are we keeping the same equipment, the same manufacturer, buying higher-tier machines from them—or are we switching to something else because of the tariffs?' To Graczyk, there are bigger concerns than the added financial burden caused by the import taxes. It's the breakdown in the U.S.-China trade relationship—and the inkling that it could get worse, not better—that gives him pause about eating the cost of potential duties and sticking with Chinese suppliers. 'We already figured out how to work it out with the previous tariffs, the 145 percent, because [the printers] generate so much margin and profits that we can absorb [the tariff cost],' he said. But he worries about a 'complete decoupling' of the world's two biggest economies. 'We believe our business model supports the investment in this equipment, even with those outrageous tariffs, but the biggest threat is to business continuity; whether our business needs can be met long-term with companies based in China,' he added. But machines manufactured outside of China, too, will be subject to trade barriers—even those made in nations the U.S. considers allies. Desma, which crafts direct-injection molding machines used by the footwear industry in Germany, has also felt the impacts of tariff talk. While goods from the country face only a 10-percent duty rate (for now), the intense swings in the administration's tariff strategy are not doing anything to propel what was already a sustained and healthy trend toward onshoring, according to regional sales manager Marco Schafer. 'Many people consider options and discuss scenarios, but we have not experienced a rush into investing into manufacturing capabilities, and going at it full-steam,' he said. 'And I think people are right to be cautious, because you just saw what happened with China—you went from next to nothing to over 100 percent. Now they're back to 30 percent, and it's questionable if that has any effect whatsoever, or if the market will eventually just absorb those costs and not much will change.' Schafer said footwear firms have been eager to bring some portion of their manufacturing closer to home for at least three or four years, and those that understand the business case for doing so didn't need tariffs to push them over the finish line. 'It's not so much the Made in USA label; there are some hard economic figures' that underscore the appetite for reshoring. 'You are in the market you're selling in, so your logistics are shortened. The other thing is capital—if you order container loads of goods from Asia, your capital is tied up for quite a long time, whereas if you manufacture here and you have shorter lead times, your cash flow is actually improved.' But it's a decision every company has to make for itself, and much of it has to do with modeling costs versus output. 'A simplified view: you realistically have to make at least 500 pairs of the same or similar product in a day, in a one-shift operation, to even be able to consider an investment into automation,' he believes. Desma's 'bread and butter'—direct injection molding machines—allow footwear manufacturers to produce foam midsoles for performance shoes and sneakers. The largest, most advanced model can churn out 1,500 to 2,000 pairs per day. All told, it's a big investment, with machines costing hundreds of thousands of dollars. Ergo, the footwear manufacturers who are intent on scaling operations using these machines aren't doing so on a whim. 'All the major projects we're working on—whether those are already projects we have on order, or projects we hope to have on order soon—they all originated in 2024,' Schafer said. 'Those projects don't happen overnight; the machines and calculations are complex, so you have to really be sure that you believe in your product and in your forecast.' In short, tariffs are generating interest, but they're not turning the tides for makers of advanced machinery. Even if an American footwear firm decided today that the unstable trade environment necessitated a sea change in sourcing strategy, they couldn't fast-track that shift. 'We're dealing with six-to-seven-month lead times after we after we get an order, but to get the right configuration of the equipment, whether it's a machine or automation line, you're easily involved with engineering six to 12 months before a company is ready to place a [purchase order]. These are often two-year projects,' he said. 'People know that if they get into this field, it's a big commitment.' There are myriad other factors in the equation, from availability of raw materials (many of which are still sourced from Asia or Europe), to staffing (workers must be trained on robotics and electronics), and facilities, which must be equipped to support the machinery and its output. 'All that needs to be put into consideration,' Schafer added. 'And therefore, the whole tariff thing—yes, it triggered some discussions, but no active projects as of yet.' That could change with more clarity about the future of America's trade relationships. Of the volatility of the past two months, Schafer said, 'We hope that the worst is behind us, and that after the loud time comes the time of more quiet negotiations behind closed doors.' This article ran in SJ's Tech Report. To download the full report, click here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22 minutes ago
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Oil prices trim gains as investor concerns over Iranian supply risks ease
Oil futures trimmed gains on Monday morning as investor concerns over the threat of supply disruptions stemming from US strikes against Iran's nuclear facilities faded. Brent crude (BZ=F), the international benchmark, was up less than 1% after gaining as much as 5.7% when the futures market opened Sunday night. West Texas Intermediate (CL=F) also rose about 0.6% to trade above $74 per barrel. Monday's price response was muted as Wall Street weighed various scenarios after President Trump announced on Saturday the US struck three Iranian nuclear facilities — including the threat of Iran closing the Strait of Hormuz, a critical chokepoint for oil flows. "The main reason for this stability is that energy infrastructure has largely been spared from direct attacks, with number of oil tankers transiting through the Strait of Hormuz remaining steady," JPMorgan's Natasha Kaneva and her team wrote on Monday morning. On Sunday futures spiked after Iran's parliament voted to close the Strait of Hormuz, but the final decision rests with Iran's Supreme National Security Council and Supreme Leader Ayatollah Ali Khamenei. The oil market is now factoring in "a one-in-five chance of a material disruption in Gulf energy production flows, with potential for crude prices to reach the $120-130 range," Kaneva said. "Yet, beyond the short-term spike induced by geopolitics, our base case for oil remains anchored by our supply-demand balance, which shows that the world has enough oil," she added. She also noted that "with fewer reliable partners in the Middle East and limited regional appetite for a broader conflict, Iran faces a constrained set of options and a heightened set of risks as it deliberates its course of action." Other possible retaliatory moves from Iran could include supporting Yemen's Houthi rebels in renewed attacks on commercial shipping or targeting US naval bases in the region. If crude climbs into the $120 to $130 range, analysts predict gasoline and diesel prices could rise by as much as $1.25 per gallon. 'Consumers would be looking at a national average gasoline price of around $4.50 per gallon—closer to $6.00 if you're in California,' Andy Lipow, president of Lipow Oil Associates said in a Sunday note. The key issue isn't just the potential for supply disruption, but how long it lasts, Rebecca Babin, senior energy trader at CIBC Private Wealth, told Yahoo Finance on Sunday. 'If infrastructure is hit but can be quickly restored, crude may struggle to hold gains,' she said. 'But if Iran's response causes lasting damage or introduces long-term supply risk, we're likely to see a stronger and more sustained move higher.' Last week, JPMorgan analysts noted that since 1967 — aside from the Yom Kippur War in 1973 — none of the 11 major military conflicts involving Israel have had a lasting impact on oil prices. In contrast, events directly involving major regional oil producers — such as the first Gulf War in 1990, the Iraq War in 2003, and the imposition of sanctions on Iran in 2018 — have all led to meaningful and sustained moves in oil markets. 'During these episodes, we estimate that oil traded at a $7–$14 per barrel premium to its fair value for an extended period,' JPMorgan's Kaneva wrote. They added that the most significant and lasting price impacts historically come from 'regime changes' in oil-producing countries — whether that be through leadership transitions, coups, revolutions, or major political shifts. 'While demand conditions and OPEC's spare capacity shape the broader market response, these events typically drive substantial oil price spikes, averaging a 76% increase from onset to peak,' Kaneva wrote. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) had raised output in the months leading up to Israel's strike on Iran on June 13. Ines Ferre is a Senior Business Reporter for Yahoo Finance. Follow her on X at @ines_ferre. Click here for in-depth analysis of the latest stock market news and events moving stock prices
