Trump's Tariffs F*cking Over His Oil Industry Pals. Gosh, That's A Shame.
None of Trump's fossil fuel schemes make much sense. Yay?
During the presidential campaign, Donald Trump loved to explain how he would end inflation by drill-baby-drilling for more oil, even though the USA during the Biden years was already drill-baby-drilling more oil than any nation ever. We had to produce even more oil, and Big Oil sure loved Trump’s promise that he would roll back all of Joe Biden’s progress on climate.
Once in office, Trump got to work rolling back climate regulations and ignoring the Constitution, even trying to bring (bogus) criminal charges in an attempt to undo Biden climate programs. Betcha the oil industry gratefully reciprocated with a new boom in drilling, huh?
Funny thing there! It turns out that oil companies are also capitalists, and unless there’s money to be made, they won’t just go and drill new oil wells to Own The Libs. And as Heatmap’s editor Robinson Meyer points out, Trump’s nutso tariffs were TERRIBLE for Big Oil, leading immediately to sharp drops in the prices of oil and oil company stocks. The day after Trump announced the tariffs, OPEC announced it would sharply increase oil production, which would only drive oil prices lower — a move Trump had been asking OPEC to make, because he promised lower oil prices.
Somebody probably should have told Trump that if “West Texas Crude” drops below $65 a barrel, new wells won’t bring a profit. That price went to about $62 after the tariff announcement, and as of Tuesday afternoon, it remained around $61.50.
The oil price shock “could essentially prohibit any new drilling activity in the United States for the time being,” Meyer explains, and if prices stay low, even some current wells may shut down because they aren’t profitable.
Even after Trump partly delayed some of the tariffs, oil prices have yet to rebound because the 10 percent baseline tariff on all imports, plus the huge tariffs on China, have everyone pretty sure there’s a recession on the way. On Monday, OPEC downgraded its oil demand growth forecast for 2025 and 2026, betting that growth in oil demand would grow by 1.3 million barrels per day, about 150,000 barrels per day lower than its previous forecast. It cited the likelihood of turmoil from American tariffs as the reason.
But the oil cartel also said it remained committed to the increased production targets it had announced earlier, so that’s going to be a lot more product chasing slower demand, which is likely to drive down oil prices and further reduce any incentive for US oil companies to drill new wells.
OPEC’s forecast was followed Tuesday by an even more pessimistic forecast from the International Energy Agency, which said the world’s economies face “substantial risks” from Trump’s tariffs. The IEA reduced its oil demand growth forecast by a third from its earlier estimates.
The IEA noted that the US tariffs exempted imports of oil, fossil gas, and refined fuels, but said that “concerns that the measures could stoke inflation, slow economic growth and intensify trade disputes weighed on oil prices.” The agency added that the forecast could be revised down further depending on whatever insane shit Trump pulls next, too.
The Guardian adds that major banks have also revised their forecasts for oil prices, too, because of the likelihood of a worldwide recession.
The Swiss bank UBS cut its price forecast by $12 a barrel to $68 a barrel for this year while Goldman Sachs said it expected the benchmark crude price to average $63 a barrel this year, and fall further to $58 next year.
Those are not prices that are likely to inspire a lot of new drill-baby-drilling, sorry Donnie.
It’s not only the price of oil that’s going to hurt oil companies, though; as Meyer notes at Heatmap, you can’t just go drill oil and gas wells without a hell of a lot of equipment like
steel pipe, motors, condensers, valves, and more — and a large share of those goods come from overseas. Since Trump imposed a 25% tariff on steel and aluminum last month, drillers have watched the price of tubular steel pipe rise by roughly 30%, [oil analyst Cory] Johnston said.
And yes, we checked; the 25 percent steel and aluminum tariffs are separate from the Liberation Day tariffs, and were not rolled back. Separately, Trump is maybe thinking about a temporary pause on his “permanent” 25 percent tariffs on autos and auto parts, to give manufacturers “a little bit of time because they’re going to make them here, but they need a little bit of time. So I’m talking about things like that,” as the Great Man put it. Car parts supply chains can be completely resourced in like 30 or 90 days, right?
Back to fossil fuels: Not only is Big Oil likely to be screwed by Trump’s tariffs, Meyer notes that fossil gas isn’t enjoying any kind of Trump boom either, even though he insisted that was inevitable. Trump rolled back Biden’s ban on new liquefied natural gas (LNG) export terminals, but the countries most likely to import LNG haven’t announced any new contracts with US gas companies because the market is in chaos and several of them were targeted for high tariffs; even with those temporarily off the table (but the universal 10 percent tariff still on), they aren’t so sure they’ll really need US gas now.
Trump might try to push long-term LNG deals with the EU, Southeast Asian countries, and maybe China as part of his negotiations to end or reduce his big tariffs, of course. If he does, then another problem for the US market would arise: Higher gas exports would drive domestic gas prices much higher, which would be delightful for the industry, but shitty for US consumers and for electricity prices. And of course all of that’s thrown into chaos by the likelihood of a tariff-driven recession.
Ain’t macroeconomics fun?
As Meyer said recently in a lovely little satirical piece at Heatmap, the practical effect of Trump’s weird obsession with tariffs may actually result in exactly the kind of worldwide degrowth that some of the most radical environmentalists have called for, resulting in far lower carbon emissions as the world economic order collapses. Of course, it would come at the cost of a worldwide depression, which more responsible climate advocates tend not to favor, what with all the human costs. But hey, that’s just Green New Donald pursuing his radical plan to decarbonize the economy by wrecking it.
We suppose Irish babies might also make for a good alternative fuel source, too.
[Heatmap News / CNBC / Guardian / Heatmap]
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I kind of love that painting, which was new to me when I found it in an image search. Hooray for the WPA and hooray for the public domain.
When trump crashes the economy, President Ocasio-Cortez should definitely bring back the WPA arts and humanities programs, since DOGE is gutting the conventional ones already. The Idaho Humanities Council just lost its entire federal allocation for the coming year.
"West Texas Crude" is Ken Paxton's Grinder profile handle.