Oil prices dropped significantly on Monday, reaching their lowest point since April 2021 due to concerns over a potential economic slowdown caused by tariffs. President Trump had aimed to control inflation by boosting the U.S. oil supply to reduce energy costs. However, the recent decline in energy prices is attributed to bleak global economic prospects, leading to a situation where producers might struggle to increase production at a profit.

President Trump's recent announcement of reciprocal tariffs led to a ripple effect in global markets, causing oil prices to plunge. West Texas Intermediate crude oil futures hit a low of $58.96 on Monday morning, marking the first time they fell below $60 since April 2021. The 15% slump in oil prices is linked to Trump's tariffs, anticipated to elevate the U.S. tariff rate to its highest level in over a century. Economists fear that such high tariffs could hamper global economic growth, thereby reducing oil demand. Trump had promised to curb inflation by making energy more affordable.

Oil prices play a crucial role in determining inflation and impact prices through production and transportation costs. They are known for their volatility, which is why some economists prioritize core inflation indicators that exclude energy and food prices to gauge inflationary patterns. The Federal Reserve's favored inflation gauge, the Personal Consumption Expenditures Price Index, showed a rise in December, January, and February. Yet, core PCE rates increased more significantly during these months.

While lower oil and gas prices might counterbalance tariff-driven price hikes, they could bring about separate economic challenges. According to the Dallas Fed Energy Survey, drilling a new oil well would require an average price of $65 per barrel to be profitable, with nearly 60% of producers needing prices above that threshold. This predicament could complicate Trump's agenda to boost American energy production. Some companies have already expressed concerns that increased steel tariffs might deter them from completing wells due to elevated costs, potentially reducing the number of wells brought online.