U.S. Oil Industry Hesitates as Trump Promises Energy Revolution

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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• President-elect Trump has vowed on the campaign trail to support the oil, gas, and coal industries.
• The new Trump Administration will lift the pause on LNG export permits.
• The U.S. oil and gas industry is not expected to significantly increase oil production in the short term.

Team Trump is preparing to make sweeping changes to the U.S. energy sector on day one. Boosting U.S. oil and gas drilling and accelerating permits for domestic energy infrastructure and LNG exports are expected to be top priorities for the new administration.

While many of the President-elect’s energy proposals are on the wish list of the U.S. oil and gas industry, executives at top companies have already signaled that Trump’s inauguration would not launch four years of “drill, baby, drill” in the shale patch.

Sweeping Changes

The transition team of incoming U.S. President Donald Trump is already drafting an energy package to expand domestic oil and gas drilling on federal lands and offshore lease sales, in addition to expediting LNG export permits, sources with knowledge of the plans have told Reuters.

President-elect Trump has vowed on the campaign trail to support the oil, gas, and coal industries and repeal some of President Biden’s environmental-oriented measures, including a pause on new LNG permitting and the minimum possible offshore oil and gas lease sales mandated by Congress.

The new Trump Administration will lift the pause on LNG export permits, accelerate permitting for drilling on federal lands and in federal waters, and offer lease sales more frequently, according to leaks. And this is also what analysts expect.

Typically, such a U-turn in policy would require passing through Congress or the federal regulatory bodies.

Related: National Gasoline Prices Fall Below $3 Per Gallon

But analysts expect that Trump would do as he has promised and declare an energy emergency—a move that could allow some parts of the energy package to move forward with executive orders from the President and thus bypass lengthier processes through Congress or federal agencies.

Trump is also expected to seek new Congress funding to build up the Strategic Petroleum Reserve (SPR), which was drained in half as the Biden Administration released crude from the reserve to curb the oil price spike following the Russian invasion of Ukraine.

In a sign of what the energy industry can expect, Trump last month picked a shale boss, Chris Wright, chief executive of Liberty Energy, as his nomination to lead the Department of Energy. Wright is a vocal critic of the energy transition as envisaged by most Western governments to date, instead calling for energy realism and prioritizing the supply security and affordability of energy rather than its emission footprint.

The nomination of Doug Burgum, the Governor of North Dakota, to be the interior secretary and head of a new National Energy Council at the White House, is also a signal to the industry that America’s leadership in fossil fuel production and exports are also high on Trump’s agenda.

“The common thread in the thinking on energy expressed by both Wright and Burgum is that they want to boost production of all types of energy, including fossil fuels,” commented Ed Crooks, Senior Vice President, Americas, at Wood Mackenzie.

“They do not deny that human-caused climate change is a real threat that needs to be addressed. But they argue that there are other priorities for policy that are more important and more urgent, and that oil and gas can continue to play the central role in the global energy system into the indefinite future,” Crooks noted.

“Drill, Baby, Drill”?

The industry, through the American Petroleum Institute (API), has released a five-point policy roadmap—suggestions for the new administration to boost resource development and exports, issue a new five-year federal offshore leasing program, and repeal the EPA’s vehicle tailpipe rule.

To a large extent, this wish list aligns with the policy changes Trump has pledged and is widely expected to enact, many of these on day one.

However, a key Trump campaign slogan – “drill, baby, drill” – is not necessarily on the minds of U.S. oil and gas company executives.

The priorities of the U.S. oil industry have drastically changed since Trump’s first term.

The U.S. shale patch is drilling, but it is drilling because it wants to distribute more of the profits to shareholders. It has made huge progress in capital discipline and efficiency gains and is getting more bang for its buck. Priorities are now returns to investors and financial frames capable of withstanding oil price volatility.

“We’re not going to see anybody in ‘drill, baby, drill’ mode,” ExxonMobil Upstream President Liam Mallon said at the end of last month.

“A radical change (in production) is unlikely because the vast majority, if not everybody, is focused on the economics of what they’re doing,” Mallon added.

The other U.S. supermajor, Chevron, announced last week that its 2025 capital expenditure (capex) would be lower than in 2024.

Chevron expects its upstream spending next year to be about $13 billion, of which roughly two-thirds will go to develop its U.S. portfolio.

“Permian Basin spend is lower than the 2024 budget and anticipated to be between $4.5 and $5.0 billion as production growth is reduced in favor of free cash flow,” Chevron said.

By Tsvetana Paraskova for Oilprice.com

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