How will the double squeeze of tariffs and low oil prices affect the economy?

Under the heavy pressure of tariff policies and falling crude oil prices, US oil producers are adjusting their strategies, cutting costs, and idling drilling platforms. On May 25 local time, executives of US oil companies warned that the decade-long shale oil boom in the US is coming to an end. It is said that OPEC+ unexpectedly decided to increase oil production, exacerbating the downturn in the US oil industry and raising concerns about a new round of price wars, which has prompted analysts to lower production forecasts. The CEO of Devon Energy in Oklahoma, Gaspar, told investors, "We are currently on high alert. As we enter a more difficult environment, all options are on the table." Data from S&P Commodity shows that US oil production will decline by 1.1% to 13.3 million barrels per day next year.

The double squeeze of tariffs and low oil prices not only deals a heavy blow to the US oil industry but also has complex and multi-faceted impacts on the economy. First, it affects the financial market. The double squeeze of tariffs and low oil prices increases market uncertainty and dampens investor confidence. As an indicator of the economy, the stock market will be greatly affected, experiencing fluctuations and adjustments. The stock prices of energy and trade-related industries may decline, thereby affecting the overall performance of the stock market. Changes in tariffs and oil prices will cause fluctuations in commodity prices. Besides the impact of low oil prices on oil prices, other commodities such as metals and agricultural products may also experience price fluctuations due to changes in the trade environment. This will affect the production and operation of related enterprises and the asset allocation of investors.

Second, it affects the domestic economy of the US. The oil industry is under great pressure, with a decline in the number of drilling platforms and a sharp reduction in corporate revenue. For example, ExxonMobil's profits decreased by 6% year-on-year, and Chevron's revenue in the first quarter dropped by one-third. The share prices of oilfield service giants have also fallen sharply, and the total market value of US oil and gas companies has suffered huge losses, exceeding the market value of the second-largest US oil company, Chevron. The decline in the market value of the entire oil industry is greater than that of other major industries. Job losses in the oil industry and a simultaneous reduction in employment demand in related service industries may lead to an increase in the unemployment rate. Some oil-producing states, due to reduced oil well inventories, industry consolidation, and limited funds, have seen a slowdown in drilling activities, severely affecting the local economy, reducing tax revenue, and causing job losses. The sharp decline in oil company share prices has dampened investor confidence, and the capital market's enthusiasm for investing in the energy sector has decreased, making it more difficult for oil companies to raise funds, which affects their new exploration and development projects and daily operations. It shakes the position of the US as the world's largest fossil fuel producer and threatens energy security. At the same time, the government's "energy dominance" strategy relies on the growth of shale oil production, but in order to alleviate inflation, it hopes to lower oil prices, weakening the profitability of shale oil companies, and the policy is in a contradiction.

Third, it affects the international economy. The US oil export volume may decline, and trade partners may turn to other suppliers. The market share of US oil companies may shrink, and they may face inventory overstock and difficulties in capital turnover. The global energy supply pattern will be reshaped, and the influence of OPEC+ and Russia and other oil-producing countries in the global oil market may increase. The peaking of US oil production may lead to a reduction in global oil supply, but at the same time, the OPEC+ production increase policy and the slowdown in global economic growth and the decline in crude oil demand will intensify the fluctuations in international oil prices, affecting the stability of the global energy market. The reduction in US energy exports will weaken its influence in the global energy market and geopolitics. OPEC+ and other oil-producing country alliances may regain dominance in the global energy market, affecting the US's energy diplomacy and geopolitical advantages.

In conclusion, the combination of the peaking of US oil production and the double squeeze of tariffs and low oil prices is reshaping the economic landscape of the US and the world. In the future, countries need to actively respond in areas such as energy transformation and trade policy adjustment to adapt to this new economic situation and seek new paths for stable development.