Ex-Reagan adviser reveals what he thinks of Trump's energy policies: 'We've just seen the beginning'
President Donald Trump aims to lower oil prices, specifically targeting around $50, while increasing US oil production. Top economist Art Laffer backed Trump's vision, saying the president's energy surge could significantly lower oil prices and ignite economic growth. Laffer, a former member of Ronald Reagan's Economic Policy Advisory Board, paralleled Reagan's oil policies with those of Trump's and pointed out promising similarities.
"We need to free up energy here in the United States. We need to free it up. We need to bring those prices down. And we've just seen the beginning. If you'll remember, when Reagan came in, when he took the oath of office, he decontrolled oil. And the price of oil fell by almost 50-60% in real terms. It was just an amazing drop there, which really spurred the economic growth of the Reagan era. And I think it's going to do the exact same thing for Donald Trump," Laffer stated while appearing on Fox Business' "Varney & Co."
Laffer further stated that lower oil prices may pressure Russia regarding the Crimea and Ukraine situation, which is crucial for America and potentially the world. He also said that the focus is on the need for energy within the U.S. to support technological advancements, with optimism about future energy developments. However, there exists a contradiction within the Trump administration as they propose heightened sanctions on countries like Iran and Venezuela, impacting the global oil supply. Currently, approximately 20% of global oil is traded under sanctions, which complicates production evaluations.
US energy policy under Trump intends to lift drilling restrictions and deregulate to lower equilibrium oil prices, although increases in oil production will take time. Despite the US being rich in oil reserves, the response from OPEC, particularly Saudi Arabia, remains uncertain. Current oil pricing is above the calculated fair value, with geopolitical risks influencing market dynamics, Natasha Kaneva, JPMorgan's head of global commodities strategy, put forth during a discussion on Bloomberg. Meanwhile, the Trump administration aims to enhance oil supply, expedite project approvals, pause prior green investments, and reduce industry regulations.
Economically, the cost of living is closely tied to oil prices, influencing inflation and the prices of various goods. Although gasoline prices vary regionally and are mostly determined by crude oil prices, taxes, refining, and marketing also play key roles. The oil industry's profitability is challenged by current low prices, necessitating a break-even point of about $64 per barrel. With drilling permits extended significantly during the Biden administration, Trump seeks to streamline this process, especially on federal lands, to allow for increased production, CNBC reported.
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