By Felicity Bradstock | OilPrice.com | Several U.S. oil and gas companies have warned that they will not be looking to increase production unless prices increase significantly. Before his inauguration, President Donald Trump stated he wanted to “Drill, Baby, Drill”, when it came to oil and gas. However, oil majors are concerned that increasing oil and gas output even further could create a glut and drive prices down, something they want to avoid.
On his first day in office, President Trump declared an energy emergency, stating, “The integrity and expansion of our Nation’s energy infrastructure is an immediate and pressing priority for the protection of the United States’ national and economic security.”
Trump signed several executive orders on his first day in office, including one on energy that includes a wide range of provisions aiming to “unleash America’s affordable and reliable energy and natural resources”. This effectively ended the Biden administration’s pause on the approval of new LNG exports. It also commenced processes for easing regulations on oil and gas production. Trump also signed an order to lift restrictions on oil, gas, and mineral production in Alaska and announced plans to establish an inter-agency working group to determine and implement measures to expedite oil and gas development.
Last year, U.S. oil and gas production rose to record highs. U.S. crude output increased by 260,000 bpd month-on-month, to a record 13.46 million bpd, in October, in line with demand growth, according to the U.S. Energy Information Administration (EIA). In 2024, drilling operations became more efficient, allowing for greater output. However, weaker-than-expected demand growth in several parts of the world, particularly China, contributed to lower oil prices.
Many oil and gas companies have shown support for Trump’s executive orders, which will make it easier to conduct operations, including new exploration projects and production increases. However, several oil executives have said that these new policies will not lead to an immediate boost in output, stating concerns over oil prices. While Trump hopes to help reduce inflation by decreasing energy prices for consumers, many oil companies are hesitant to increase output without the guarantee of higher oil and gas prices.
Ron Gusek, the president of oil field services company Liberty Energy, stated, “What you are seeing is a huge amount of positivity.” Gusek added, “But it’s too early to say that that’s going to translate into a change in actual activity levels here in North America.”
U.S. oil and gas companies have spent huge amounts in increasing their oil and gas production in recent years. This is largely in response to the Russian invasion of Ukraine and subsequent sanctions on Russian energy, which created an oil and gas shortage around the globe and drove prices up. In addition, with the International Energy Agency’s warning that the demand for fossil fuels will decline from 2030, many oil and gas companies are exploiting their resources while global demand remains high. However, after several years of spending, many are reluctant to invest more without the guarantee of a return. Brent Benchmark crude oil prices are expected to average $74 per barrel in 2025, marking a decrease from $81 in 2024, according to the EIA.
OTHER NEWS: US Tariff Hike Impacts Global Trade and Economy
There is a potential for a big market shift now that Trump is President. Several customers have shown interest in signing long-term deals for U.S. gas exports since he entered office, according to Ben Dell, a managing partner of the energy investment firm Kimmeridge. Dell explained, “People want to be early and in the forefront of signing up for U.S. products to try and stave off potential tariff threats.”
Trump has repeatedly threatened to introduce 25 percent tariffs on Canadian and Mexican products, including energy. He initially said that he planned to introduce the tariffs on his first day in office, which he corrected to 1st February, and now he may push until April, to allow time for negotiation between country officials, according to several sources. The introduction of tariffs on oil and gas could drive up prices and increase reliance on domestic production.
At present, U.S. exploration and production companies are expected to target a 5 percent production growth this year, and flat to slightly lower year-over-year capital expenditures, according to analysts at Scotiabank. This is with the exception of Exxon Mobil, which has plans for a large increase in production.
Rob Thummel, a senior portfolio manager at Tortoise Capital, explained, “We expect most oil and gas producers to remain disciplined with capital expenditures. However, less regulation will make it easier to increase drilling activity if commodity prices reach levels that are too high.”
Despite Trump’s best efforts to immediately push oil and gas production up, it appears that U.S. fossil fuel producers will only increase output if the price is right. The introduction of several executive orders favoring oil and gas will make it easier to develop new projects and produce more if oil majors desire. It could also encourage more customers to invest in U.S. oil and gas, to avoid tariffs on foreign energy products. However, it is unlikely to have an immediate effect on U.S. oil and gas output, which is already at a record high, unless the Brent Benchmark looks set to increase.
By Felicity Bradstock for Oilprice.com
