Tariff threats from the Trump Administration have roiled some sectors of the economy. Stocks continued their slide Monday morning, erasing gains made since the president was elected in November.
Meanwhile, Trump, in a Fox News interview Sunday, declined to rule out the possibility that a recession may be coming. U.S. consumer confidence also fell in February, with Americans expressing concern over the potential for inflation.
But one commodity appears to be relatively stable, at least for now: oil.
Matt Smith, energy analyst for Kpler, explains why. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Who is riding this little tête-à-tête? About $2.40 gas prices in Texas – that struck me as, well, not exactly cheap, but on the low side of what I’ve seen it before in recent years.
Matt Smith: Yeah. Absolutely. So you’ve had President Trump that has come in, and when we look at the oil price – and the oil price is the key driver of prices at the pump – oil has dropped about $11 since the inauguration. So it’s gone from $78 down to $67ish today. So that’s nearly a 15% drop.
So we haven’t seen quite that drop at the pump. But to your point, prices in Texas are at $2.70 on the average. The national average is just kicking around above three $3/$3.10 – something like that.
So yeah, you’re correct. We are in the realm of lower gas prices, at least for now.
So explain that when we’ve got all this oil trade and talk of tariffs and all of this, how is it that we’re seeing gas prices stable, if not just a wee bit lower?
So in the grand scheme of things, if we were to see tariffs being placed on Canadian crude and/or Mexican crude, then we would be seeing higher prices coming through.
But from day to day, things keep changing here. President Trump has like an ulterior motive in terms of what he wants to get from this situation. But for now, because there’s not the expectation that these tariffs are really going to be sticking, we’re seeing prices remaining in check.
So a lot of this is built into expectations. And the valuation that’s being placed on oil right now… Seems like a lot of traders are betting that, come April, these tariffs won’t ultimately take hold. And so prices don’t need to rise to reflect that.
Yeah, exactly. He’s just using this as a negotiation tactic. And we’re seeing this across other countries as well – with China, but also with Russia talking about tightening sanctions or easing sanctions. Maximum pressure on Iran.
All of these are negotiation tactics and not necessarily things that are going to stick.
What about China? The tariffs against China – do those include oil and gas?
So we’ve had a 10% tariff placed on anything that’s coming out of China into the U.S. And then it got double down on – to 20%.
But after that initial 10% from the U.S., there was retaliatory tariffs from China on U.S. oil going into China of 10%. There was a 15% tariff on LNG.
But that’s not a big issue in the grand scheme of things. We don’t send very much oil to China anymore. And so that’s having minimal impact on that side of things.
But, by all means, the tariff is going to have a big impact.
You know, one of the key themes from the Trump administration is “America First.” I know this is something that he’s talked a lot about, and a lot of people have this idea of American energy independence.
And I hear you talking about Canada sending in oil. And I know that the U.S. buys a lot of oil, and at some point, we’re going to have to dig deep on this whole concept of American oil and gas independence.
I know it’s a complicated story, and we don’t have time for it here, but overall, where do you see this trending when it comes to consumer prices on energy?
They should remain fairly flattish here as long as inflation doesn’t start charging higher.
But to just quickly address the independence issue – that’s a myth. Because when we’re talking about crude from Canada, Canada sends 4 million barrels a day into the U.S. every day. And we’re sending out 4 million barrels a day of crude into the international markets.
And so there’s inflows and outflows. But ultimately the U.S. needs these other countries to send oil.
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