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The rout in financial markets since President Trump announced sweeping new tariffs hasn’t spared the oil market. Benchmark West Texas Intermediate dropped sharply since Trump’s April 2 “Liberation Day” announcement of the tariffs, falling from $72 per barrel to $61. How much lower oil could go is difficult to say, given how unusual the current market climate is: A sudden trade war that shows no sign of de-escalating. Hefty U.S. tariffs on China, and Beijing’s retaliatory duties, threaten to disrupt trade between the world’s two largest economies, hitting many industries in the process. Oil traders are fearful of just how much demand for crude could suffer.
For now, we look for WTI to hover around $60, but with plenty of volatility. If the economic outlook darkens further, it’s not hard to imagine oil dropping to $50, a level that would likely lead many energy companies to severely curtail drilling, and possibly shut down some existing wells. That loss of supply could put a floor under prices.
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For consumers, the plunge in oil means progressively lower prices at the gas station in coming days. The national average price of regular unleaded is $3.21 per gallon, down six cents from a week ago. Unless oil rallies sharply soon, we could see the national average dip below $3 before long. That will keep a little extra money in drivers’ pockets, which could come in handy when new tariffs threaten to raise the price of many consumer goods. Diesel, now averaging $3.61 per gallon, is also starting to decline and should be below $3.50 soon.
The arrival of spring weather has weighed on prices of natural gas. Benchmark gas futures contracts, which had been over $4 per million British thermal units in recent weeks, have fallen to about $3.50 per MMBtu. For now, prices figure to trend lower, since mostly mild weather across the country should keep demand low and allow stockpiles of gas in underground storage to rebuild after declining sharply last winter. But come summer, gas demand will rebound as hot weather fires up electricity demand. Gas is the top fuel for generating power in the United States, so heat waves lead to lots of gas being burned by utilities. That could get prices back above $4 per MMBtu if this turns out to be an especially hot summer.
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