Pleasure at the pumps! Oil prices Could Soon Drop To $50, Threatening Climate battle

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An oil trading anomaly in June 2022 dropped the price of crude to below $20 a barrel, a figure that lasted more than a fraction of a second (in fact, about two days).

Other than that, the sticker has rarely been below $40 since 2022. The reason? Simple supply and demand. Meaning that today, with abundant crude oil, the price is $67 and falling.

So what’s happening? One aspect of oil prices is what is close to a recession in China. GDP there hovers around 4% growth, and the government in Beijing is trying a $1 trillion stimulus package. In the meantime, the appetite for crude by the world’s largest importer is low by recent standards. At the same time, the world’s largest producer, the U.S., is pumping the black stuff out at nosebleed levels — in December 2023, America produced the most oil by any country in any month in history (and it has hardly slowed down since).

The Trump effect
Even without taking China into account, the U.S. may be able to drop oil prices further on its own. First and foremost, former President Trump, who will be president again soon, has promised that oil companies can drill anywhere in the country. This includes millions of square miles of land and previously off-limits offshore areas.

The other reason crude could drop is a price war. OPEC+ cannot afford the U.S. to pick up global market share based on American oil exports. Most OPEC+ members have inexpensive exploration and production costs, with Saudi Arabia’s production cost is $10.

All of which means that plans to deal with the dip in prices are already developing among the world’s largest oil producing nations about what to do if crude prices begin to implode. Meanwhile, the whole situation is likely to impede the transition to renewables energy.