Why oil prices, tariffs, and Chinese coal production could dampen the White House goals.
Amid a flurry of activity last week, President Donald Trump met with oil executives and posted his enthusiastic support for authorizing more coal power as part of his “energy dominance” agenda. Yet while the administration pushes for more fossil fuels, the political economy of energy at this moment – both in the United States and globally – is more complicated.
Here are three big reasons why Trump’s energy dominance agenda won’t dominate: oil prices, tariffs, and Chinese coal.
1. Oil prices are too low already
First, domestic oil businesses are concerned about prices already being too low to support continued drilling. Polls suggested inflation was a key issue in the election that returned Trump to the presidency. And the price of gasoline is both a prominent component and symbol of U.S. inflation. Low prices right now are mostly due to lower expected global growth (partially the result of Trump’s tariffs and broader uncertainty about the direction of U.S. economic policy) as well as OPEC+ loosening its production limits. Rhetorically, Trump remains committed to low oil prices, often mentioning $50 a barrel. He believes that target price will push down the price of gasoline that consumers ultimately purchase from the pump.
Trump’s oft-repeated refrain is “drill, baby, drill.” And the implied logic is simple: More oil coming out of the ground will lower prices. But there are contradictions inside this logic and even more with Trump’s broader tariff agenda. As much as oil executives love drilling, they do so to pursue profits. And low oil prices directly reduce their profits in ways that they’d prefer to avoid. Scott Sheffield, who founded Pioneer Natural Resources, an oil and gas company that Exxon acquired last year, said “$50 oil is not going to work.” Crude prices this month have hovered below $70/barrel. Trump donor and oil tycoon Harold Hamm suggested that higher prices – around $80 a barrel – are needed to induce additional domestic drilling.
2. Tariffs could thwart any benefits to U.S. consumers
Trump’s tariff agenda is especially hard to square with the rhetoric of fighting inflation. To date U.S. tariffs have surprisingly focused on Canada and Mexico, both of which are major oil producers. Canadian heavy crude, in particular, plays a key role in the U.S. refining industry. These massive, specialized facilities built at huge expense blend the sludge-like Western Canadian Select with the comparatively light products that come out of fracked U.S. wells to produce a range of petroleum-based commodities.
Shifting away from imported – and now tariffed – crude oil would be difficult for refineries that were designed precisely to be efficient with a particular mix of crudes. Tariffs on Canadian and Mexican imports would bleed into the prices of U.S. refined petroleum products, and ultimately raise the price of gas at the pump. It’s unclear, however, how much of a change this might create.
3. And what about coal?
Third, Trump’s calls for rebooting U.S. coal production seem to function mainly as a cultural signifier of owning the liberals – and rely on misunderstanding China’s energy transition. U.S. coal generation declined during the first Trump administration and continued to slide during the Biden years because of the poor economics of coal production. U.S. natural gas and increasingly cheap renewables are plentiful and comparatively clean when compared to coal, disrupting the profitably of many coal facilities. As a result, a number of U.S. coal plants shut down in recent years.
Trump warns that China is “opening up hundreds of all Coal Fire Power Plants” to “gain tremendous Economic advantage over us.” China does continue to invest in new coal-fired generation at a scale unlike other countries. In 2023, in fact, China accounted for 95% of new coal plant construction. Yet Chinese coal plants only generate electricity (and emissions) about half the time, increasingly operating only at moments of peak power demand, a role that is more often and more fitting for natural gas-fired peaker plants in the U.S. and elsewhere. Furthermore, in the first two months of 2025, coal generation is down 5.8% compared with last year’s figure, despite all of the newly built coal plants.
In sum, the United States is producing more energy than it ever has. But Trump’s energy dominance agenda remains more vibes than reality.
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