As the bears take over the oil market, President Trump’s tariff threats on Mexico are expected to be “pretty detrimental for the U.S. energy industry,” said Ashley Petersen, a senior oil market analyst at Stratas Advisors.
But there may be an upside for consumers.
With summer fast approaching, U.S. drivers could reap the benefits at the pump, seeing as gasoline prices are expected to drop with the steep decline in crude.
In a report released Thursday, the American Automobile Association forecasted a summer average for gas below last year’s, which came out to about $2.87 a gallon from Memorial Day to Labor Day. AAA said drivers may have already seen the highest prices of the year.
And trade tensions with Mexico and China could add to the downturn.
“With Mexico taking almost 22% of our refined product exports, if they impose retaliatory tariffs like we've seen with China, some of those products could stay stateside and lower prices for consumers as well,” Petersen said.
The national average for gasoline was $2.78 a gallon, according to AAA, which is down from $2.89 a month ago and $2.94 a year ago.
Petersen also noted that airlines “could see a profit boost, and then consumers could see lower prices,” if oil prices continue to slide.
West Texas Intermediate crude settled at $51.68 a barrel on the New York Mercantile Exchange on Wednesday after the closing bell, which is 22% below its most recent high of $66.30 on April 23. A bear market is marked by a drop of 20% or more from a recent high.
But for now Petersen said “consumer spending is still healthy.”
“We had a solid Memorial Day driving season,” she said. “And the international stocks aren't growing either, in terms of gasoline and jet fuel stocks. I mean, clearly the stuff is being consumed. And that's what we want to see.”