10/04/2025
Trump, Tariffs and Oil!
Oil prices are under sustained downward pressure, mirroring a broader slump across global markets, after the Trump administration announced the implementation of a sweeping new tariff regime on all imports from all trading partners. Since the announcement last week, crude prices have tumbled, stabilizing around $60 per barrel—marking their lowest level since April 2021 and reflecting growing investor unease over the potential macroeconomic fallout.
I shared my views with CNN on the fall-out of these recent tariffs on the oil market in particular
The sharp decline in oil prices—now nearing a four-year low—has raised concerns of an global economic slowdown triggered by tariff-induced trade disruptions that could lead to boycotts, embargoes and trade wards! The comprehensive nature of the tariffs raises fears of retaliatory measures and the possibility of prolonged trade conflicts, which could erode business confidence, stifle investment, and weigh heavily on global GDP growth. Even though lower energy prices might offer some relief to consumers by cushioning the inflationary impact of tariffs on goods, they carry significant downsides—particularly for oil-exporting economies and energy producers.
Upstream oil companies are particularly being squeezed from both ends. On the one hand, import duties on critical inputs such as steel, oilfield chemicals, and drilling equipment can potentially raise the cost of exploration and production. The cost of well completions, in particular, has surged, placing pressure on capital expenditures and project viability. On the other hand, crude prices are falling, with the risk of breaching the psychologically significant $60 per barrel threshold. If prices slide further, high-cost producers—especially those operating in marginal shale basins—may be forced to shut in wells or delay drilling programs. This could lead to a plateauing or even a decline in U.S. crude output, reversing several years of growth.
In a move that underscores its growing anxiety about flagging demand, OPEC—which accounts for roughly 40% of global oil production—announced last week that it would increase output by 411,000 barrels per day starting in May, far exceeding market expectations of a more modest 140,000-barrel hike. While some observers interpret this as a signal to counterbalance the impact of U.S. tariffs and stabilize global supply, the decision may also reflect deeper concerns about demand softening, particularly from major Asian economies. China and India—key drivers of global oil consumption—face heightened exposure to trade volatility and currency fluctuations, which could curtail industrial activity and dampen fuel demand.
As markets digest the implications of the new tariff regime, volatility remains the defining feature of the outlook. The combination of elevated geopolitical risk, uncertain trade dynamics, and uncoordinated production responses from major suppliers could fuel further turbulence in the oil market. For now, the balance of risks suggests continued downward pressure on crude prices, with potential spillovers into global equity markets, emerging economies, and energy-linked sectors. If trade tensions escalate further, the next few quarters could see not just lower oil prices, but also greater instability across the broader commodity landscape.
Read the full article here
https://www.linkedin.com/posts/rajat-k-813a392_trump-tariffs-and-oil-oil-prices-are-activity-7315957573273198593-qSsJ?utm_source=share&utm_medium=member_desktop&rcm=ACoAAACCTE8BJ6kl3kXs8QAodrBHOkmFkud9LZE
