The price of crude oil determines the policies of any individual government more than any government could hope to affect the price of crude oil. This is the case even for the US, the world’s largest producer and consumer of same.
Though exit polling during the recent US Presidential election doesn’t support the notion that voters were making their choice based on proposed energy policies, there were distinct rhetorical differences on that measure between the candidates. In the end, Donald Trump prevailed, opening the door to initiate policies he maintains will bring the price of gasoline below $2/gal.
Even if the US were not already producing record amounts of crude oil—not just for it but for any country ever—finding and pulling the right levers to actually bring this price drop about would require a degree of control likely unavailable to the country’s chief executive.
Nonetheless, with most of gasoline’s price tied to that of crude, it’s in the crude market that the most useful pressure points are likely to be found.
Rolling back assorted regulations could increase incremental supply over time, potentially lowering prices. But the deepening or stricter enforcement of sanctions would have the opposite effect, artificially constraining supply and giving prices a boost.
Incentivizing Saudi Arabia and other amenable OPEC+ participants to increase supply could help mitigate this effect. But do those countries—or for that matter, US-based operators—want lower prices?
A similar question can be posed regarding potential tariffs. They would almost certainly slow the global economy, eroding demand growth and with it the price of a barrel of oil, but to what net benefit to the industry?
Nearly half of all 2024 US crude oil and LNG exports have gone to Europe. Targeting the continent with tariffs could complicate this. Even if substitute buyers could be found elsewhere, Europe is much closer to US export sites.
What to do
The American Petroleum Institute (API) has laid out a five-point policy roadmap to “secure American energy leadership and help reduce inflation.” It includes protecting consumer choice, bolstering US geopolitical strength, leveraging the country’s natural resources, reforming its permitting system, and advancing sensible tax policy.
As part of the second of these points, API urged the incoming administration to “ensure the open access of American energy to global markets.” A trade war would run counter to this advice.
The International Energy Agency (IEA) projects 102.6 million b/d of oil production for 2024. Its ‘Oil 2024’ annual medium-term market report forecasts US production increasing by 2.1 million b/d by 2030. But production from Argentina, Brazil, Canada, and Guyana is expected to grow 2.7 million b/d over the same period and OPEC+ output continues to be intentionally constrained.
Current forecasts anticipate global oil demand to peak between 2029 and 2034. IEA anticipates 106 million b/d (versus 114 million b/d of supply) at the earlier end of this range and Goldman Sachs 110 million b/d (and a supply shortfall) at the latter end.
There are outliers. OPEC doesn’t anticipate a demand peak and forecasts 112.3 million b/d by 2029 and 120.1 million b/d by 2050. bp, by contrast, expects peak demand in 2025, falling to 75 million b/d by 2050.
Regardless of which organization’s prediction ends up being closest to the mark, the surest way to allow the US oil and gas industry to maximize its global potential in the meantime is to remove barriers to it doing so, or at the very least avoid introducing more of them in the form of tariffs. Prices—whether of crude oil, natural gas, or any of their derivatives—might rise. Prices might fall. But market participants will allocate their resources accordingly and make the choices in each instance that best meet both their needs and those of their customers.