WPB: Many U.S. oil and gas companies have made it clear that they will not expand production unless prices rise significantly. Although President Donald Trump has pushed for increased drilling, major producers worry that boosting supply could flood the market and drive prices down—an outcome they want to avoid.
Upon taking office, Trump declared an energy crisis, prioritizing infrastructure expansion for economic and national security. He immediately signed executive orders to ease restrictions on oil and gas production, lift limits on energy development in Alaska, and revoke the pause on new LNG export approvals.
Despite record U.S. oil and gas production in the past year—hitting 13.46 million barrels per day in October—companies remain cautious. Improved drilling efficiency has enabled higher output, but weak demand growth, particularly from China, has kept prices lower. While Trump’s policies support industry growth, executives warn they will not lead to an immediate production surge without stronger market incentives.
The oil sector has invested heavily in recent years, partly in response to the global energy shortage triggered by Russia’s invasion of Ukraine. With fossil fuel demand projected to decline from 2030, companies are maximizing profits while demand remains high. However, after years of heavy spending, they are reluctant to expand further without guaranteed returns. The EIA expects Brent crude prices to average $74 per barrel in 2025, down from $81 in 2024.
Trump’s presidency could reshape the market, with some buyers already seeking long-term U.S. gas contracts to avoid potential tariffs. Trump has floated the idea of imposing a 25% tariff on Canadian and Mexican energy imports, which could raise prices and increase reliance on domestic production.
Most U.S. oil and gas firms plan a modest 5% output increase this year while keeping capital expenditures stable. Exxon Mobil is a notable exception, planning significant expansion. Rob Thummel, senior portfolio manager at Tortoise Capital, noted that while companies remain cautious, fewer regulations could allow for rapid drilling increases if oil prices rise.
Although Trump aims to boost production, companies will only expand if market conditions are favorable. His executive orders create a more business-friendly environment and may attract buyers looking to avoid foreign energy tariffs. However, with output already at record levels, a major surge is unlikely unless oil prices climb.
By WPB
Oil, Bitumen, Prices, Market
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