US Economy Benefits from Cheap Oil Amid Shale Challenges and Geopolitical Impact

The discussion centers around the impact of cheap oil and President Trump's stance favoring it. A drop in oil prices below $60 could make many US shale projects unprofitable, leading to reduced capital investments and drilling activity, thereby decreasing domestic oil production. The primary difference is that US shale oil is produced flexibly and can be quickly halted and resumed with relatively low restart costs, thanks to hydraulic fracturing technology. In contrast, heavy oil extraction, predominant among OPEC+ countries, requires continuous operations, making shutdowns costly and complex. Cheap oil significantly reduces the costs of goods, logistics, and helps slow inflation. In the US, lower oil prices translate into cheaper gasoline, electricity, and production costs, enabling factories and farms to operate more profitably, lowering consumer prices and increasing disposable income. This boosts economic growth by making US goods more competitive abroad and encouraging consumer spending. Given that the US oil sector is a small component of the overall GDP, the broader economic benefits of low oil prices outweigh the sectoral downsides, favoring a policy environment that supports inexpensive oil.