Oil and Gas Industry Faces Uncertainty as Trump Administration Shifts Focus

As President Donald Trump’s second administration gets underway, the U.S. oil and gas industry is feeling a sense of whiplash. After grappling with what they perceived as hostility from the Biden administration, many in the industry anticipated a return to more favorable policies under Trump. However, the reality has proven to be different, creating a wave of uncertainty for oil companies and producers.

Expectations for Trump’s Energy Policy

Prior to Trump’s return, the oil sector expected new licensing and permitting on public lands, the expansion of natural gas infrastructure, and a deregulatory agenda that would facilitate growth. Yet, the implementation of heavy tariffs and trade wars poses risks that could lead to a recession and a protracted downturn in oil prices. The realization of these concerns was evident when Trump administration officials began promoting the benefits of lower oil prices, presenting the possibility that the oil and gas industry could thrive even when West Texas Intermediate (WTI) crude prices hovered around $50 per barrel.

Shale Producers Push Back

Leading executives in the shale oil sector, however, disagreed significantly with these optimistic assessments. During the recent CERAWeek energy conference in Houston, some oil and gas leaders cheered the Trump administration for halting restrictions on liquefied natural gas project authorizations. However, behind closed doors, discussions revolved around bearish sentiment concerning potential tariffs and the risks of declining prices. The executives struggled to rationalize Trump’s current actions with his notable “energy dominance” campaign promise.

The Reality of Oil Production Control

The struggle for the U.S. oil industry is exacerbated by unrealistic expectations regarding presidential control over oil production. While the White House can influence leasing and permitting policies—affecting roughly 25% of U.S. crude oil production—the rest of the market responds to factors largely beyond a president’s reach. Post-pandemic, shale producers have adopted a disciplined fiscal approach, fostering capital efficiency, debt repayment, and stable dividend policies. Consequently, these factors mean companies are less inclined to take on risky production ventures without appropriate price support.

The Role of the Dallas Federal Reserve Energy Survey

According to the Dallas Federal Reserve Energy Survey, companies now assess that they require oil prices of approximately $65 per barrel to proceed profitably with new wells. When Trump announced a 90-day pause on “reciprocal” tariffs, there was an immediate rebound for WTI prices, which surged from $57 to $63 per barrel. Despite this spike, ongoing economic uncertainty points to a more likely trajectory of falling prices.

OPEC+ Adjusts Production Strategy

Adding to the complexity of the oil landscape, the Organization of the Petroleum Exporting Countries and allied producers (OPEC+) recently decided to increase production by 411,000 barrels per day starting in May 2025. This decision stems from several factors, including discontent among producers over excessive output by nations like Kazakhstan and Iraq, as well as a strategic maneuver to challenge U.S. shale producers as they navigate this new economic reality. Historical parallels exist; notably, the group’s past decision to ramp up production in response to economic downturns raises questions about the stability of current market conditions.

A Cautious Future for the Oil and Gas Industry

As a result of the various pressures and uncertainties, the U.S. oil and gas industry appears poised for a period of restraint. With companies adopting a defensive posture—deferring investments, cutting capital expenditures, and scaling down operations—the negative consequences of such strategies will resonate through the oilfield services sector and local economies reliant on energy production.

The Takeaway

This period serves as a stark reminder that while presidential policies can shape industry dynamics, they cannot singularly dictate the complex and interconnected nature of global markets driven largely by demand. As the macroeconomic landscape shifts, energy dominance remains a distant goal for the U.S. oil and gas sector under such uncertain conditions.