The Impact of the “Drill Baby Drill” Approach on Oil Prices
The phrase “Drill baby drill” has been a focal point of Trump’s recent campaign, emphasizing his administration’s approach to oil drilling. But what will be the effect on oil prices due to this change in oil industry regulation? The answer may surprise you.
Despite the rhetoric, the Biden Administration did little to impede oil drilling, so Trump’s approach may not bring about a significant change. The key factor influencing drilling activity will be the oil price itself. If the price rises above $90/barrel, we can expect increased drilling, but if it falls below $60/barrel, activity may slow down.
The oil industry, known for its lack of discipline, will likely respond to price fluctuations. A sustained low price will force companies to cut back on production to remain competitive. This will create a range for oil prices, with US producers acting as a stabilizing force.
External factors, such as OPEC+, will also play a role in oil price movements. OPEC+ has spare capacity that could impact prices if brought online. Their actions, similar to US producers, will likely only increase production in response to higher prices.
Our analysis suggests that oil prices will remain in the $60-$90 range in the near future. While a significant increase is possible in the coming years, factors like OPEC’s influence could lead to price fluctuations. Stay informed to make sound financial decisions in this ever-changing market.