The White House Steadily Advances Toward the $50 Oil Price Target, While the US Energy Industry Is in Turmoil

The economy has always been a highly complex and interdependent system, meaning that changes in any single factor can lead to unexpected outcomes. This also implies that the "treat the head for a headache, treat the foot for a foot pain" approach of US President Trump's economic policies may often result in the opposite effect.

Executives in the US energy industry stated that, with risks skewed to the downside and heightened uncertainty in global economic and oil demand growth, US shale oil producers may struggle to achieve profitable drilling and could be forced to reduce activities.

This runs counter to Trump's dream of cheap energy. Peter Navarro, the energy chief appointed by Trump, once stated that the administration aimed to lower US oil prices to $50 per barrel. However, an increasing number of warnings suggest that this idea is fraught with danger.

Amid Trump's tariff shocks, US crude oil futures prices fell to $55 this week before rebounding above $60 on Thursday. Investors anticipate that further US tariff hikes on Chinese goods will exacerbate the risks of a global economic slowdown or recession, dampen global oil demand, and lead to persistently low oil prices.

A flurry of actions, but the results...

In the White House's vision, due to policy easing, US drillers would be eager to produce more crude oil, thereby lowering US oil prices to fulfill Trump's promises to voters. However, the president of an energy company stated that when he voted for Trump, he never anticipated the current chaos.

According to oil executives, if US oil prices fall below $60 per barrel, near Thursday's closing price, companies may be forced to slow drilling, cut spending, and likely lay off workers. This has everyone in the industry scared.

In addition, some energy industry players stated that, apart from the uncertainty in trade policies, Trump's tariffs on steel have also increased costs for these companies. The government's chaos is a disaster for the commodity market.

Adding to the pain for the US energy sector, OPEC+ decided last week to increase oil production starting in May, even as drilling in the region is likely to be forced to halt. This has raised concerns about supply outstripping demand, which could further weaken if the global economy slows down.

Others pointed out that once US energy producers "shut down," achieving Navarro's $50 oil price target would only be possible through imports. The macroeconomic consequence of this move would be a further expansion of the trade deficit that Trump despises.

Historically, the US trade deficit in 2008 was around $800 billion, with nearly half ($386 billion) related to oil trade imbalances, equivalent to the current US trade deficit with China. From this perspective, Trump clearly needs to quickly revise his tariff policies again, focusing on energy imports.

This outcome, filled with contradictions and volatility, ultimately erodes confidence in investing in the US. Susan Bell, Senior Vice President of Commodity Markets at Rystad Energy, stated that Trump's tariffs have led oil and gas companies to reduce capital expenditures, but people have lost confidence not only in the shale gas industry but also in US investments.