Before taking office, Donald Trump was fond of chanting “Drill, baby, drill” as his main theme in his approach to energy and “green” ideas. With oil market prices around $60 per barrel, where prices moved first in early April primarily due to fears of the impact of the new president’s actions and now again due to OPEC+ production increases, he may drop his favorite “chant” or ditty because it won’t work economically at all. The reason for this is the so-called breakeven point, i.e. the point at which production is still worthwhile in relation to market prices.
According to statistics from the research agency Statista, the “breakeven point” for US producers in 2024 was on average USD 62 per barrel of US WTI oil for new wells and USD 38 for existing wells.
Currently, WTI crude oil is falling to USD 56 per barrel, similar to the level at the beginning of April. The price has already fallen by almost a fifth since Trump’s tariffs were announced.
Source: Kurzy.cz
According to experts, a reasonable price level for new drilling is needed somewhere around USD 85 per barrel, around which the price last hovered in the middle of last year. At prices around USD 60, the whole thing is no longer viable for existing wells, and at prices close to USD 50, it would be an unmitigated disaster for everyone.
Oil prices that are too low will cause US producers to curtail or even shut down their production altogether, which is exactly the opposite of Trump’s intention.
US oil production is currently around 13.5 million barrels per day. In the spring of 2021 it was around 11.3 mbd.
The current oil price slump will certainly not go unchallenged by the major producers, because in addition to the pure production breakeven, there is also the so-called fiscal breakeven, which looks at how high oil prices need to be in order for the producing countries in question to adequately feed their treasuries and public budgets. In this respect, only the United Arab Emirates, where the level is just below USD 50, can still be relatively calm. For others, the problems in this regard are often long overdue.
