Donald Trump's call for a new oil boom will be pushed back by Wall Street's reluctance to agree to another drilling binge, rock leaders have warned.
Our total oil Rystad Energy and Wood Mackenzie said that production in Trump's second term will rise by less than 1.3 million barrels per day.
The executives said investor pressure on companies and the economic realities of a perpetually sluggish sector of oil prices would be obstacles to Trump's quest to launch an era of “American energy dominance.”
“The incentive, if you will, is just drill, baby, drill. . . . I don't think companies will do that,” said Will Vanloh, CEO of private equity group Quantum Energy, one of the largest investors in the shale sector.
“Wall Street is going to dictate here — and you know what? They don't have a political agenda. They have a financial agenda. . . . They have zero incentive to basically tell the management teams of these companies to go and drill more wells.”
The reality on the ground can be a disappointment Trumpwhich is betting that a big jump in oil supplies can beat inflation by making goods and fuel cheaper.
“We will lower prices… We will be a rich nation again, and the liquid gold under our feet will help do that,” the president said in his inaugural address Monday.
In Davos on Thursday, he also called on the OPEC cartel to lower oil prices, suggesting this would allow central banks to cut interest rates around the world “immediately.”
But lower oil and gas prices will make shale companies less profitable — and less likely to follow Trump's “drill, baby, drill” order, of course.
“Prices will be a bigger signal than politics,” said Ben Deal, managing partner at Kimmeridge, an energy investment firm that owns shale assets including Texas' Permian Basin, the world's most prolific oil field.
After U.S. oil production hit a record high last year, the EIA expects production to grow just 2.6 percent to 13.6 MMb/d in 2025 before rising less than 1 percent in 2026 due to price pressures. .
Some rock producers also worry that the best sites have been exploited after more than a decade of exploration in states such as Texas and North Dakota.
Following his swearing-in ceremony this week, Trump signed executive orders to “unlock” new oil and gas supplies and declare a “national energy emergency.” He has also moved to eliminate Biden-era regulations that diggers say will increase their costs and restrict activity.
But executives warned that Trump's full support for fossil fuels and drilling may have limited impact.
“As much as the incoming management is very favorable around power and energy…we don't see a significant change in activity levels going forward,” said David Schorlmer, CFO of Propetro, an oilfield services company in The Permian.
Producers' hesitation comes after two decades of excessive growth – sometimes punishing volatile oil prices.
American oil and gas production has exploded in the past 15 years, as drillers have found ways to unlock vast deposits locked in shale rocks. Wall Street bankrolled the drilling race that made the United States the world's largest oil and gas producer.
But brutal price declines in 2014 and 2020 sparked widespread bankruptcies, a more cautious approach from investors and a change in producer behavior – especially in the face of softer crude prices.
A recent Kansas City Federal Reserve survey recently found that the average U.S. oil price needed for a significant increase in drilling was $84 per barrel, versus about $74 per barrel today.
JPMorgan predicts that US oil prices will fall to $64 per barrel at the end of this year and that shale activity will “slow to a crawl” in 2026.
“If prices are anemic, you can remove all the red tape you want. It won't move the needle on production,” said Hassan Eltouri, director of corporate and transaction research at S&P Global Commodity Insights.
America's second-largest oil producer, Chevron – a huge shale investor – plans to cut spending this year. For the first time since the pandemic Oil Disruption, which gets a budget of $14.5 billion-$15.5 billion for 2025, down from $15.5 billion to $16.5 billion last year. And Balq
Conocophillips expects spending to be down $500 million from last year, and Occidental Petroleum and EOG are holding activity levels nearly flat — decisions designed to please Wall Street.
“Shareholders of these energy stocks…if you do more (capital spending) than they allow, you will… Scream bloody murder and sell your shares.”
