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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