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President Trump’s tariffs are posing a major barrier to his plans to expand U.S. oil production — or, in his words, “drill, baby, drill.”
Since the tariffs were announced last week, oil prices have fallen to hover around $60 per barrel, a nearly four-year low, Rebecca Elliott reported. At this price, fossil fuel companies will most likely re-examine their plans.
“That is really a psychological and financial threshold for a lot of the industry,” she told me. “Below that level, you start getting wells that are no longer economic to drill.”
Oil companies are being squeezed by both rising costs and falling prices. Tariffs on steel have pushed up the cost of new wells by 10 or 20 percent, according to some estimates. And oil prices are falling over concerns about a potential economic slowdown coupled with OPEC’s recently announced plans to increase production.
If prices stay low, or fall further into the $50 range, which more and more of the people Elliott spoke to think is possible, U.S. oil production could flatten out, or even decline, she said.
How will all of this affect the fight against climate change? While slower economic activity tends to lead to lower greenhouse gas emissions in the short term, it’s not clear whether that would outweigh the climate effects of a slowdown in building renewables like wind and solar.
