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Your guide to what the 2024 US election means for Washington and the world
Cutting red tape, unleashing, debottlenecking — these are all great business-friendly policies. They work wonders on industries previously fettered by regulation. But there is little evidence that this has been the case for US fossil fuels. That suggests President Donald Trump’s efforts to expedite oil and gas projects will deliver a trickle, not a flood.
Oil producers have been “drill, baby, drilling” for quite some time. In 2024, US oil production averaged 13.2mn barrels a day, making it the largest oil producer in the world. That’s two and a half times what the country was producing in 2008. The supply of US gas, too, has roughly doubled during that period.
True, this breakneck pace cannot continue forever. The industry will add an extra 270,000 barrels a day on average in 2025 and 2026, according to consultancy Argus Media, roughly a quarter of what it squeezed out in 2023. But that largely reflects the fact that a lot of the best acreage has already been exploited.
Trumpian policies, like encouraging drilling in US coastal waters, will open up new territories. Even if they contain exploitable resources, though, the time it takes to develop a project extends beyond the length of a single four-year presidential term. This is no short-term fix.
Unfortunately for Trump, what inhibits the flow of oil is not red tape, but low prices. Producing oil from US shale formations is relatively expensive. Companies need prices to be somewhere between $60 and $80 a barrel if they want to cover all their costs and pay dividends, estimates Christopher Wheaton at Stifel.
Shale is also highly sensitive to commodity price moves because, unlike traditional projects in which much of the cost is sunk upfront, maintaining shale output requires constant spending. By way of example, the record low price for US natural gas in 2024 has already caused production to nudge lower.
That rather limits Trump’s room for manoeuvre, at least with oil. Gas may be a bit more responsive, given there is some hope that strong demand, not least from data centres, and the resumption of LNG export permitting might raise domestic prices. That would help producers justify more supply.
As it stands, the oil market is hardly undersupplied. A spluttering China translates into weak demand. Opec+, which wants to see prices stay high, is sufficiently worried that it is actively holding back supply. That means that any increase in US oil production is likely to push down prices and thus be short lived. The only thing gushing in the oil patch is rhetoric.