President-elect Donald Trump may find the road to cheaper gas prices is a little rocky.
“Frack, frack, frack and drill, baby, drill,” Trump said at an October rally. Trump has said he wants to lower gas prices — which currently average $3.07 per gallon — to below $2 a gallon.
On Saturday, he tapped fracking proponent Chris Wright, the CEO of Denver-based Liberty Energy, to serve as the secretary of energy. Wright is among the industry’s most vocal supporters of fracking oil and natural gas and has said the world is not in the midst of an energy transition.
But the American oil industry is already booming and increasing output doesn’t mean gas prices will drop.
The United States produces more than 13.4 million barrels of oil each day and oil production is projected to increase to an estimated 13.6 million by the end of 2025 — the most oil produced by any country ever, according to the US Energy Information Administration.
That record is “unlikely to be broken,” the EIA reports, because no other country has come close to 13 million barrels per day. US output has been so strong that it has sent supplies overseas — exporting the same amount of crude oil, refined products and natural gas liquids as Saudi Arabia or Russia produces, according to a report published in December 2023 by S&P Global Commodity Insights.
US crude production may well increase to slightly more than 14 million barrels per day in 2025 said a report just after the election from the Eurasia Group, a political risk research and consulting firm. Such a move could reduce the average price of a barrel of West Texas Intermediate, the benchmark for US oil, to less than $60, it forecast. The price for WTI has fallen from $72.26 close on election day to $67.03 in trading early Monday.
But if the price goes too low, OPEC could cut its own production to keep prices higher, said the report. Or it could keep pumping oil to send prices lower and force some US producers out of business, it said. OPEC did that very thing in 2015 and 2016, sending oil prices significantly lower in a major price war, forcing dozens of US oil companies into bankruptcy.
If prices go too low, to between $55 and $65 a barrel, it would fall below the break-even point for additional shale production coming on line, said the Eurasia Group’s report.
Trump has bragged about how gas prices fell below $2 a gallon in the final year of his administration and said it was because of the increased production that occurred in his first term, ignoring the fact that production has exceeded that level since. He promised that there will be increased production again in his second term, and that would bring down energy and overall prices.
“We’re going to drill, baby, drill. That’s going to bring down prices of everything,” he said at a rally in August.
But gas prices fell to less than $2 a gallon, and oil prices temporarily fell into negative territory at less than $0 a barrel, in 2020 not because of increased production but because of the pandemic as American drivers were ordered to stay home or were laid off from their jobs during a severe recession.
If increased production sends prices down sharply once again, it could again cause economic hardship and pullbacks in production across the US oil patch, even if prices are far from negative territory this time around.
And even if US energy profits stay strong, that won’t necessarily mean production would increase significantly. After oil prices shot up in 2022 in the wake of Russia’s invasion of Ukraine and the sanctions on Russian oil imposed by western countries, major oil companies reported record profits. Although they increased oil production, they used much of their windfalls from higher prices to repurchase shares of their stock and in deals to buy smaller oil companies, rather than on increased exploration.
Andy Lipow, president of Lipow Oil Associates, told CNN in September that it would be hard to dramatically exceed production above 14 million barrels per day since the least expensive and most efficient places have already been drilled.
“Yes, production can go higher. But are we going to increase oil production by another 50%? That’s probably quite unlikely,” Lipow said.
The free market sets the oil output
Trump’s goal to increase US oil production — by making fracking more accessible with open drilling permits and by expanding fracking areas — likely won’t have a major impact on demand, which has slowed globally.
The EIA notes that economic growth is among the biggest drivers of oil demand. China’s deteriorating economy, combined with global clean energy efforts, have meant less demand for oil.
Oil demand in China narrowed for the sixth month in a row this past September, according to the latest International Energy Agency’s Oil Market report. OPEC+, a group of leading oil-producing countries, even delayed plans to increase production because of concerns about excess supply.
Experts note that US oil output is driven by smarter and more efficient operations by oil companies, not presidents.
“It’s not like President Biden or any president has a dial in the Oval Office to increase production,” said Bob McNally, a former energy official to former President George W. Bush.
CNN’s David Goldman and Matt Egan contributed to this report.
