Donald Trump has promised that he will lower energy costs for Americans by loosening regulations around oil and gas drilling in order to boost supply.
And while it’s unclear if the industry will have an incentive to do that, in the immediate term, oil prices — as well as those Americans pay at the pump — look set to fall in 2025 regardless.
That could provide a potential early economic win for Trump in his presidency after voters’ concerns over inflation helped propel him to victory in the 2024 election.
Oil prices declined 3% in 2024, falling for a second year in a row. And while a rally in recent weeks has pushed West Texas Intermediate (CL=F) and Brent crude (BZ=F) to their highest levels since October, Wall Street predicts prices are set to fall in the year ahead.
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US production already hovers near peak levels, accounting for roughly 20% of the world’s oil, more than any other country.
Executive orders are already on the agenda as soon as the president-elect is sworn into office, with Trump expected to instruct agencies to start unwinding the Biden administration’s limits on offshore drilling and federal lands, according to a report in the Wall Street Journal.
On Wednesday, Chris Wright, Trump’s pick for Energy Secretary told senators in charge of his confirmation that if confirmed, his first task will be to “unleash American energy at home and abroad to restore energy dominance.”
“To compete globally, we must expand energy production,” said Wright.
Meanwhile overseas, analysts point to oil alliance OPEC+ sitting on spare capacity, ready to take back some of its lost market share from self-imposed output cuts that have been in place for well over a year. Slowing demand growth from China as the country continues to transition to electric vehicles is also expected to keep a lid on prices.
Goldman Sachs analysts predict Brent (BZ=F) will fall from an average of about $80 per barrel last year, to $76 in 2025. At JPMorgan, analysts have said they believe the international benchmark will tumble to an average even lower — $73 per barrel.
Meanwhile, Bank of America analysts have an even more bearish view, anticipating $65 per barrel.
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To be sure, Francisco Blanch, head of Bank of America’s global commodities and derivatives research, said at a reporter roundtable in December that Trump’s sanction policy against oil producers Venezuela and Iran would be the big wildcard.
Axios recently reported Trump and his advisers plan to quickly return to a “maximum pressure” campaign against Tehran. The strategy, implemented between 2018 and 2020 during Trump’s first presidency, reinstated unilateral sanctions against Iran.
“One of the big question marks … and where our bearish stance could be wrong is what happens to Iran and Venezuelan production,” Blanch said. “If it starts going down, we’re going to be wrong and oil is going to be more in the mid-$70’s, maybe $80 per barrel than in the $60’s.”
And with oil prices set to see downward pressure in 2025, gasoline prices are also expected to trend lower for the third year in a row.
The Energy Information Administration forecasts that drivers will pay an average of $3.20 per gallon in 2025, about $0.10 lower than in 2024.
This follows an average retail drop of about $0.20 per gallon from 2023 to 2024, thanks to lower crude oil prices and narrower refinery margins.
Despite a continued downward trend, however, the impact on everyday Americans will likely be far from what Trump promised during his campaign.
“Energy is going to bring us back. That means we’re going down and getting gasoline below $2 a gallon,” then-candidate Trump said at the Economic Club of New York in September.
Analysts don’t see gasoline falling that much from its current AAA national average of $3.07 per gallon.
“What’s nearly guaranteed: We will not see pandemic era sub-$2 per gallon prices unless there is economic calamity,” GasBuddy head of petroleum analysis Patrick De Haan told Yahoo Finance in a recent interview.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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