A contested presidential race brings new hope for American drivers seeking relief at the pump.
According to The Telegraph, Donald Trump's proposed plans to increase U.S. oil production could potentially reduce petrol prices to their lowest levels since the pandemic lockdown period, with analysts forecasting prices as low as £1.26 per liter.
The anticipated price reduction stems from Trump's campaign promise to boost domestic oil production, exemplified by his "drill, baby, drill" mantra. Major financial institutions, including JP Morgan, Bank of America, and Citi, have released forecasts predicting significant drops in oil prices, with estimates ranging from $70 to as low as $60 per barrel by the end of 2025.
The president-elect's proposed energy policies focus heavily on expanding U.S. oil production capabilities. Reports indicate that Trump plans to approve new export permits for liquefied natural gas projects immediately upon taking office. These initiatives would complement his strategy to increase offshore drilling along the U.S. coastline.
The United States currently holds the position of world's largest crude oil producer and leading LNG exporter. Trump's policies aim to strengthen this position further, potentially reshaping global energy markets. Analysts at Citi specifically point to these "U.S. energy dominance policies" as a key factor in their price predictions.
According to Simon Williams at the RAC:
If oil was to trade consistently around $60 a barrel next year and the sterling-to-dollar exchange rate remains where it is now, drivers should see petrol and diesel prices come down by at least 10p a litre. This would mean unleaded dropping to around 126p – a price last seen on forecourts in early 2021 – and diesel falling to 132p. This would equate to a saving of £5.50 when completely filling up an average family car.
The projected decrease in oil prices could have far-reaching effects on global economic conditions. Lower fuel costs typically result in reduced transportation expenses, which can help control inflation across various sectors of the economy. The impact extends beyond individual consumers to affect businesses and supply chains.
Paul Dales from Capital Economics suggests that every $10 reduction in oil prices typically corresponds to a 0.1 percentage point decrease in UK inflation. This relationship demonstrates the significant influence of oil prices on broader economic indicators. The last time oil consistently traded below $70 was in early 2021, during the pandemic and before Russia's invasion of Ukraine.
Several geopolitical factors could contribute to the predicted price decline. These include potential developments such as the resolution of the Ukraine conflict, increased production from OPEC members seeking to maintain market share, and the possibility of improved U.S.-Iran relations leading to increased oil exports.
The implementation of Trump's energy policies could trigger multiple positive economic outcomes. Lower oil prices would likely help combat inflation, potentially encouraging the Federal Reserve to reduce interest rates. This aligns with another key objective of the president-elect's economic agenda.
Current petrol prices, which have reached highs of £1.50 per liter this year, represent a significant improvement from the 2022 peak of £1.90 per liter. However, the projected decreases could provide even more substantial relief for consumers. The combination of increased U.S. production and weak demand from Chinese and European markets suggests a favorable environment for price reductions.
Looking ahead, analysts expect these changes to materialize gradually throughout 2025. Capital Economics predicts oil prices will reach $70 by the end of 2025 before declining further to $60 in the following year. This gradual decline could help stabilize markets while providing sustained benefits to consumers and businesses alike.
Donald Trump's proposed expansion of U.S. oil production capabilities stands to significantly impact global energy markets in 2025. The president-elect's policies, focusing on increased domestic production and new LNG export permits, aim to lower fuel prices to levels not seen since the pandemic lockdown period. These initiatives, combined with weak demand from major economies and various geopolitical factors, are expected to drive oil prices down to $60-70 per barrel. The resulting decrease in fuel costs could lead to savings of up to 10p per liter at UK pumps, potentially bringing petrol prices to £1.26 per liter and providing substantial relief for consumers while contributing to broader economic stability.
