The US oil industry is bracing for a potential decline in production due to weakening demand and depressed prices. S&P Global Commodity Insights projects that US oil output will shrink to 13.3 million barrels per day in 2026, a 130,000-barrel decline from its 2025 forecast. This would be the second time in the past decade that US production has fallen, with the previous instance occurring during the Covid-19 pandemic.
Industry experts warn that plunging prices are hurting the industry, with Diamondback Energy stating that US onshore oil production has likely peaked and will start to drop due to low commodity prices. Bob McNally, president of Rapidan Energy Group, says the US shale oil sector is “gloomy” and is battening down for a storm.
The silver lining for consumers is that gas prices are under control, with some analysts expecting prices to trend even lower in the coming months. However, the trade war has caused recession fears, driving oil prices lower. OPEC’s production hikes have also contributed to the decline.
Despite the challenges, US crude prices have bounced back above $60 after reaching a four-year low of $57.13 per barrel earlier this year. The national average price for regular gas fell to $3.15 a gallon on Friday, according to AAA, a significant drop from last year’s record high of $5.02 a gallon.
Industry experts say that cutting red tape and green-lighting permits cannot make up for plunging prices in the short term. The US is the world’s biggest oil producer, but it’s also most sensitive to price drops. If prices fall further, US oil production “could easily” drop in 2026, according to McNally.
The S&P Global Commodity Insights warns that “extreme uncertainty about the future of US trade” and a looming supply surplus are expected to hobble US oil production later this year and next. The firm has sharply cut its global oil demand growth outlook for 2025 from 1.25 million barrels per day before the April 2 tariff announcement to 750,000 barrels per day now.
While the decline in prices may be a boon for consumers, it could also lead to job losses or financial stress for drillers. However, the industry is more resilient today due to consolidation among big oil companies. Veteran oil analyst Tom Kloza expects gas prices to continue moving lower, saying “it’s going to be a cheap summer.”
Source: https://edition.cnn.com/2025/05/12/business/oil-trump-trade-war-gas-prices