While concerns mount over how exactly President Donald Trump's tariffs will impact the cost of coffee, cell phones and cars, there’s one price that’s tanking — and it’s something a lot of us rely on every day.
Oil fell to just $60 a barrel. That’s the lowest we’ve seen it since 2021. (And if you'll recall, that was back during the height of the global pandemic, when we weren’t traveling much.)
Tariffs are helping to cause that, sure, but that’s not the only factor at play here. And none of it is good news for President Trump’s call to increase U.S. oil production.
Just like any commodity in the market, there’s a supply side and a demand side. The oil demand is responding like it would during any economic downturn.
"On the demand side, the tariffs and the recession fears, etc, show a weaker economy, and that means suppressed demand for oil," said Morgan Bazilian, who directs the Payne Institute for Public Policy at the Colorado School of Mines.
Lower demand usually means suppliers cut back supply, he said. That makes the response this time more puzzling: "OPEC+ said they were going to increase production, and that also suppresses prices."
It sounds counterintuitive, but as other producers decrease supply, if OPEC+ increases supply, then they can gain market share, explained Hugh Daigle, who teaches petroleum engineering at the University of Texas at Austin.
"Because every time the price of oil goes up but they don't take advantage of that by increasing the amount that they're producing, other people will make up the slack for the demand that's implied by that increase in prices," he said — and that decreases their market share over time.
So, Daigle said, this is an opportunity to up production and claw that market share back.
It’s good news for Trump’s campaign promise to lower oil prices. It’s not good news for his other goal of increasing domestic oil production.
"There's not a lot of room for those extra barrels," said Daigle. "Nobody really wants them."
Domestic oil producers have already faced thin margins recently. They need prices above $60 per barrel to profitably drill a new well, per energy economist Mark Finley with Rice University. And prices fell to that threshold figure this week.
"What the administration's response to oil producers domestically has been is, 'Don't worry, lower oil prices will be offset by easier regulation,'" Finley said.
The hope of the Trump administration was to have lower prices and increased domestic production, he added. But "it's hard to see how less regulation can completely offset the decline of lower oil prices."
Decreased regulation could increase profits for companies anywhere from $2 to $4 a barrel, Finley said. But by the beginning of this week, crude oil prices had already fallen by $10.
