Oil prices dropped to their lowest levels in years on Monday, as market concerns continued over the tariffs announced by President Donald Trump last week.
Futures for West Texas Intermediate (WTI), the U.S. crude oil benchmark, fell as low as $58.96 a barrel, marking the first time since April 2021 that prices dipped below $60. This represents a 15% drop since last Wednesday, when Trump revealed his plan to implement extensive tariffs, pushing the U.S. tariff rate to its highest level in over a century.
Economists warn that such tariffs could slow global economic growth, negatively impacting oil demand. Trump has often linked his fight against inflation to cheaper energy prices.
“Oil prices are down, interest rates are down, food prices are down, there is NO INFLATION,” Trump posted on Truth Social on Monday morning.
Oil prices directly influence inflation and also affect the cost of producing and shipping goods. Due to their volatility, many economists argue that core inflation — which excludes energy and food costs — is a more reliable measure of inflation trends.
The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, rose by 0.3% in December, January, and February. However, core PCE, which excludes energy and food prices, increased by 0.4% in February.
While falling oil and gas prices could help offset tariff-related price hikes, they may also have economic consequences. According to the latest Dallas Federal Reserve Energy Survey, oil producers need an average price of $65 per barrel to profitably drill new wells, with nearly 60% requiring even higher prices. This could hinder Trump’s goal of boosting domestic oil production.
“In an ironic twist to the administration’s goal of ramping up domestic production, higher steel tariffs may lead to fewer wells being completed due to higher costs,” one oilfield services company told the Dallas Fed. “Margins are already tight for many wells, which may reduce the number of wells brought online.”
The president has argued that the increased costs could be offset by slashing regulations, which he says burden oil and gas producers. However, some drillers in the Permian Basin, which produces nearly half of America’s oil, claim the administration’s regulatory changes will have little effect.
“We still get our permits from the Railroad Commission in Texas, not the Environmental Protection Agency,” one company said. “Federal regulations matter more for operations in the Gulf of Mexico or Alaska, but not for fields like the Permian, Eagle Ford, Bakken, or Utica.”
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