President Trump has reportedly homed in on $50 a barrel as the price he’d like to see US oil prices trend toward, alleviating energy costs for US households.
The problem for the US oil industry? That math doesn’t check out.
In the Permian Basin, the largest collection of oil plays in the continental US and the crown jewel of American energy, breakeven prices hover between $62 and $64, according to data from the Dallas Federal Reserve.
With the price of WTI crude oil (CL=F), the US benchmark, around $57 today, this means, at a basic level, that barrels extracted by US oil companies on US soil are not being sold for more than it costs to drill for them.
“Capital efficiencies and returns drive our investment decisions,” one respondent told the Dallas Fed’s most recent quarterly energy survey. “If economic conditions worsen, drilling and completion activities will cease in 2026.”
As a wave of global oversupply gluts the oil market, the Energy Information Administration expects that Brent crude (BZ=F) — the international benchmark — will fall toward an average of $55 per barrel within the first quarter of 2026 and remain at that depressed level throughout the year.
WTI prices would almost certainly move in tandem, pegging its value around $51.50.
This is likely good news for Trump, especially as affordability has stepped in as the leading issue for voters ahead of the midterm elections.
The national average price for gas in the US on Thursday was $2.81 per gallon, according to AAA data, about $0.25 lower than a year ago and the lowest level since March 2021.
As for Trump’s plans for the industry, the question is more complicated.
Read more: Find the best credit cards for buying gas
In May, when oil was trading at around the same levels it is today, Travis Stice, executive chair of Diamondback Energy (FANG), an independent exploration and production firm, said the industry was already looking over the edge of a cliff.
“There have only been two quarters since 2004 where [oil prices] have been as cheap as they are today,” excluding 2020’s anomaly, Stice wrote in a letter to shareholders. “Therefore, we believe we are at a tipping point for U.S. oil production at current commodity prices.”
Even the oil majors — ExxonMobil (XOM), Chevron (CVX), and ConocoPhillips (COP) — which are often able to maintain higher breakeven marks due to their scale and multiple business lines through the energy supply chain, are starting to feel the heat.
Exxon and Chevron have both pegged their global breakeven targets for 2030 at around $30 a barrel. That’s well below today’s prices but, given current trends, becoming increasingly close.
