(TNND) — Oil and gas prices have fallen and could fall more, which might help offset potential inflation impacts for Americans amid an uncertain situation with tariffs.
“I think this is a good news story for America,” business professor Jay Zagorsky said about lower oil prices.
Citing government data, Zagorsky estimated that a typical American household—a mix of individuals and families—spends around $2,500 a year on gas for their cars.
West Texas Intermediate crude oil prices have dropped about 15% since the start of the year, with trading still underway Thursday.
Since President Donald Trump took office on Jan. 20, the crude oil cost per barrel has fallen from around $75 to around $60.
That’s a 20% drop since inauguration day.
And that drop means about $500 in annual savings for the typical household spending $2,500 a year on gas.
“Which is actually quite significant for many people’s budgets, said Zagorsky, a professor with the Questrom School of Business at Boston University.
The AAA national average gas price was $3.22 on Thursday, down about 40 cents from a year ago but up around 13 cents from a month ago.
The March consumer price index was released Thursday.
That popular measure of inflation showed gas prices were down 6.3% from the previous month, with seasonal adjustment, and down 9.8% from last year.
And Zagorsky noted a drop in airplane fares, which he said is another positive impact on consumers from falling fuel prices.
So, does Trump and his “drill, baby, drill” mantra deserve credit for lowering oil and gas prices?
No, Zagorsky said.
He said the price drop is market-driven.
And it’s too soon for any Trump effects to show up at the local gas station.
Oil producers have to get permits and equipment and start drilling if they want to increase production.
That all takes time.
So, why then have prices fallen?
“I think a couple of things are going on,” Zagorsky said. “And one of the things is I believe that oil traders are concerned about a future recession. And in a recession, people drive less. So, they’re not buying as much to stockpile for the summer driving season. But I can’t tell you that until we get inventory statistics out … and that won’t come for probably another couple of weeks.”
Oil and gas executives recently offered criticism in a Dallas Fed Energy Survey for the Trump steel tariffs and “drill, baby, drill” policy position.
On average, executives from oil and gas firms forecasted West Texas Intermediate oil to be $68 per barrel by the end of the year. Responses ranged from $50 to $100 per barrel.
An oil pump is seen in a field on April 8, 2025, in Nolan, Texas. (Photo by Brandon Bell/Getty Images) )
Oil executives told the Dallas Fed that, in a twist to the administration’s hope for more domestic oil and gas production, higher steel tariffs may result in fewer wells completed due to higher completion costs.
The margins are thin enough for many wells, and this will likely result in downward pressure on total wells brought online, according to the Dallas Fed survey report.
“The administration’s chaos is a disaster for the commodity markets. ‘Drill, baby, drill’ is nothing short of a myth and populist rallying cry,” an oil executive surveyed by the Dallas Fed said, according to edited and published survey comments. “Tariff policy is impossible for us to predict and doesn’t have a clear goal. We want more stability.”
Another said U.S. oil producers aren’t going to increase their output if costs to build wells are higher and if crude oil prices are low.
“‘Drill, baby, drill’ does not work with $50 per barrel oil,” the executive said.
Another said, “There cannot be ‘U.S. energy dominance’ and $50 per barrel oil; those two statements are contradictory. At $50-per-barrel oil, we will see U.S. oil production start to decline immediately and likely significantly.”
The Dallas Fed didn’t publish the names of the oil executives in its comments section of the survey results.
Ed Hirs, an energy economist at the University of Houston, told The National News Desk in January that the U.S. is the biggest producer and exporter of oil in the world.
American producers are turning in over 13 million barrels of oil a day, including natural gas liquids.
We’re producing over 11 million barrels of crude oil a day, but we’re not energy independent.
We consume anywhere from 18 to 20 million barrels a day, depending on the season, Hirs said.
Imports range from 4 million to 6 million barrels a day.
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