Will Oil Prices Sink or Soar? Executives are Uncertain.

Will Oil Prices Sink or Soar? Executives are Uncertain.
In the Federal Reserve Bank of Dallas Energy Survey released on March 26, 2025, oil executives largely expected oil prices to stay where they are this year – at $68/barrel. However, the range of projections was quite broad, with $50/barrel on the low end and $100/barrel at the top. Uncertainty was the most popular word in the anonymous survey comments, with one respondent writing, “I have never felt more uncertainty about our business in my entire 40-plus-year career.”

Will “Drill Baby Drill” and $50/barrel become a reality in the coming months, or will some unexpected shock send prices sky high? Is forecasting really that complicated? Consumers want lower prices, but what do the Gulf States want? Would $50/barrel oil sink the industry?
 
Below are the topics we’ll cover in this blog.
 
Supply and Demand
Breakeven Price of Oil
Low/High Forecast: $50-$100/Barrel
Plastic, Polyester and Other Oil Products
Geopolitical Uncertainty
Investing in Oil and Gas
 
And here is more information on each point.

Supply and Demand
Oil prices are subject to supply and demand. After 9.11.2001, when the U.S. began fighting two wars (Afghanistan and Iraq), prices began to rise and eventually peaked at the all-time high of $145.31/barrel on July 3, 2008. At the other end of the spectrum, during the lockdowns of the pandemic, oil prices went negative, to -$37.63/barrel. Traders were paying to have someone assume their futures contracts because they couldn’t store all of the oil they were about to take delivery of!

The United States has been the world's top producer of natural gas since 2009, when U.S. natural gas production surpassed that of Russia, and it has been the world's top producer of petroleum hydrocarbons since 2013, when its production exceeded Saudi Arabia’s (source EIA.gov). The U.S. trade balance “with members of OPEC shifted from a deficit of $50.0 billion in 2014 to a surplus of $6.6 billion in 2015” (source: BEA.gov). As you can see in the chart below, the U.S. produced more oil than it consumed in 2023. Having said that, the market is global. When the U.S. needs oil abroad (to fight a war, for instance), it imports from OPEC and Saudi Arabia, rather than ship the crude around the world.

As more and more drivers switch to electric vehicles, this reduces the demand side. China’s rapid switch to EVs is one of the reasons why prices are still under $70/barrel. The fewer times we visit the gas pump, the more downward pressure we put on prices.

Did you know that most people can save $8,500 or more annually by giving up their car? The cost of taking a ride-share or taxi, renting a car here or there (with non-owner insurance) is a fraction of what we pay to be a car owner, when you consider car payments, insurance, maintenance, parking, registration and fuel. Riding a bike and walking improves our physical health as well. If you’re not ready to give up the vehicle yet (or even reduce it to one per family), at least try walking or riding a bike for local errands.  
I gave up my car years ago, and began walking, riding a bike or taking public transportation for 90% of my needs. I’m writing this blog from Rome. Financial freedom awaits those who extricate themselves from being buried alive in bills. Reduced demand should lower prices.

Breakeven Price of Oil
According to the Dallas Fed Survey, “Firms need $65 per barrel on average to profitably drill [a new well] … [ranging] from $61 to $70 per barrel” depending on the size of the firm and the location. Tariffs on steel might curtail completion of new wells due to increased costs and thin margins at the current oil price of $69.60/barrel (WTI). Lowering the price of gasoline at the pump requires increased supply, which producers won’t do if they are losing money. (We've seen OPEC and other oil producers cut production to drive up prices in the past.)

As the survey respondents pointed out, the cost of drilling is inconsistent with $50/barrel oil. One anonymous respondent to the survey explained, “The threat of $50 oil prices by the administration has caused our firm to reduce its 2025 and 2026 capital expenditures. ‘Drill, baby, drill’ does not work with $50 per barrel oil. Rigs will get dropped, employment in the oil industry will decrease, and U.S. oil production will decline as it did during COVID-19.”

All the companies examined in our Oil Stock Report Card showed lower revenue year over year and most had profit margins under 10%. As Conoco Phillips stated in their annual earnings report, “Prices and margins in our industry have historically been volatile and are driven by market conditions over which we have no control.” (Wars increase prices. Lockdowns cause prices to plunge. Demand is decreasing as drivers switch to EVs.) Email [email protected] if you’d like an updated Oil Stock Report Card.

Low/High Forecast: $50-$100/Barrel
The near-term forecasting done by the industry experts tends to just follow what the current price is, probably because no one knows what the next shock to the industry will be and which way it will take prices. Oil executives are forecasting that oil prices will increase to $74/barrel in two years and $82/barrel in five years – headed in the opposite direction of what consumers and The White House want. High gas prices have a strong correlation with recessions, largely because almost 70% of the U.S. economy is based on consumer spending. Consumers lose confidence in the economy and cut back on spending when so much of the budget goes for gasoline. Fitch Ratings is projecting $70/barrel oil in 2025 and $65/barrel in 2026.  

Plastic, Polyester and Other Oil Products
One of the ways that the oil industry is protecting itself from reduced demand, due to the rise of electric vehicles and clean energy, is to pivot more into other oil products, such as plastic, polyester, vinyl, rubber and asphalt. According to As You Sow’s report at ExxonMobil’s 2024 Annual Meeting, “ExxonMobil is the world’s largest producer of single-use plastic resins and continues to expand its production of virgin plastics despite both the likelihood of single-use plastic demand reduction and recent analyst projections of global polyethylene and polypropylene overcapacity.” Plastic is everywhere (even in our clothes and laundry sheets). Many of us are in constant contact with this petrochemical.

The rise of fast fashion is another product of Big Oil. Reports are that companies like Shein have 76% of their clothing made with polyester (oil-based fibers that also leech microplastics into our oceans and water supply). Many oil and gas companies also vertically integrate at least some of the polyester supply chain (beyond the source: oil). India’s wealthiest billionaire is a polyester/oil executive. Polyester is bad for our health, for our oceans, our fresh water and so much more. (Please purchase natural fiber clothing and nix the idea of constant shopping.) Learn more in my Fast Fashion blog.
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Geopolitical Uncertainty
On January 23, 2025, at the World Economic Forum, the 47th U.S. President asked OPEC and Saudi Arabia to lower oil costs (by increasing production). “If the price came down, the Russia-Ukraine war would end immediately,” he said. Oil and gas make up to 30% of Russia’s revenues. An end to the war in Gaza could also be positive for lower gas and oil prices, particularly if auto owners continue to reduce demand.

Oil prices dropped from $145.31/barrel on July 3, 2008, to $37.77/barrel on January 13, 2009. This partially had to do with the election of 44th President, who ran on a platform of ending the Iraq and Afghanistan Wars. However, an even bigger factor was the global financial crisis of the Great Recession. Unemployment soared to 7.9% on average in 2009. Consumers were constrained. Travel was a luxury many couldn’t afford. If you lost your job, you weren’t commuting to work or taking vacations. Demand for oil and gasoline dropped and prices plunged.

Investing in the Oil and Gas Industry
ExxonMobil, Chevron and Conoco Phillips are trading close to their 5-year highs. They pay a yield of 3-4%. However, share prices are volatile in this industry. If oil prices do indeed drop, as the current Administration desires, oil companies will go into the red and investors will watch their share prices lose money. Our best protection against the price volatility of this industry is to rebalance 1-3 times a year to capture gains and to ensure that our wealth plan is age-appropriate and properly diversified. Doing that now would equate to capturing gains near the high. (This is something we teach at our Financial Freedom Retreat.)

Due to elevated equity prices (in most U.S. companies), lower expectations for U.S. GDP growth, massive debt in U.S. corporations and a few other economic factors, we are using country diversification as substitutes for our value funds. (Oil is often found in large value funds.) Some of our substitutions offer a higher yield, while others offer higher credit quality.

Bottom Line
Oil Executives are not a fan of “Drill Baby Drill” populism or tariffs. Some have curtailed capital spending (no more new wells). One comment was, “Our ability to plan operations for any meaningful amount of time in the future has been severely diminished.” This is negative for lower oil and gas prices because there is no incentive to increase supply. Meanwhile, the increasing popularity of electric vehicles is reducing demand, while plastic becomes ever more prolific and fast fashion polyester runs rampant. In other words, there are many factors that are pulling on the tug-of-war between $50/barrel oil (which the oil industry clearly doesn’t want) and $100/barrel oil (which consumers can’t afford).
 
As consumers, we hold more cards than most of us realize. If we visit the pump less, walk and bike more, refuse plastic, and buy natural fiber clothing (instead of oil-based polyester), we can dramatically lower demand and achieve the prices we all desire. Of course, that might put the oil companies into debt restructuring, as happened during the pandemic. According to Haynes Boone, between 2015 and 2021, there were over 600 oil and gas company bankruptcy filings. (This is another reason to capture gains now if you are an investor and consider a value substitution fund.)

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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money (6th edition) and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is (2nd edition) are the most recent releases of these books. Follow her on Instagram. 
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.​​

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly-traded companies, funds or projects mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect an age-appropriate, diversified wealth plan, which has been designed strategically, with the assistance of financial professionals who are familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge, patience and diversified strategy.  
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Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.