08-04-2025
Oil prices falling into zone that discourages production growth
President Trump's social media celebration of falling oil prices highlights how — intentionally or not — his policies favor lowering fuel costs over boosting output. For now, anyway.
Why it matters: The swoon should send consumer gasoline costs downward, which Trump ran on.
But oil prices are falling into a zone that discourages production growth — especially if a prolonged trade war badly dims the global economic and demand outlook.
Friction point:"The oil industry expected strong support from this White House, but there's no way production will grow at $60" per barrel of West Texas Intermediate crude oil, energy analyst Ben Cahill of UT-Austin told Axios via email.
Exploration and production companies "have to worry about a recession, so they'll take a cautious approach to [capital expenditure] and planning. Production growth is off the table unless the macroeconomic outlook improves," he said.
Yes, but: An Energy Department spokesperson said Trump's lowering energy costs by cutting "red tape."
"These policies benefit American consumers while also reducing regulatory burdens on energy producers, making it less costly to operate in the United States," the spokesperson said in a statement to Axios.
The big picture: "Drill, baby, drill" is also a long-term idea.
White House policies aim to expand access to federal lands and ease regulations, which could be bullish for growing production or at least compensating for eventual shale declines.
"'Drill, baby, drill' and 'low fuel prices' don't have to occur simultaneously in Trump's energy agenda," oil expert Ellen Wald said.
Conventional production can have years-long — or in the case of offshore, even decades-long — planning and development horizons, she noted.
Threat level: Wald nonetheless said the effect of today's trade policies can cloud that long-term development vision.
She said the economic uncertainty Trump has introduced will lead companies to act conservatively and avoid major capital allocations.
If Trump wants to have lower fuel costs and promote future drilling, he'll need to reassure execs and investors that he's "taking steps to promote stability and security in the near and longer-term future," she said via email.
What we're watching: Whether U.S. producers publicly criticize Trump's trade policies, which a number of them were anonymously grousing about even before April 2.
An exec with shale heavyweight Diamondback Energy, which has seen its share price battered lately, offered some rather ambiguously stated concern on X (Bloomberg has more).
State of play: U.S. regular gasoline is averaging over $3.20 per gallon.
But Patrick De Haan, head of petroleum analysis at GasBuddy, said prices will soon fall as crude slides and recession risks loom.
Oil prices are at their lowest levels since 2021, with WTI shedding roughly $10 per barrel since April 2 and trading at $61 Tuesday morning.
What's next: "If tariffs aren't scaled back soon, the national average could fall below $3 per gallon in the weeks ahead, with no clear indication of how long it might stay there as market volatility persists," De Haan said in a blog post.
