Donald Trump’s call for a new oil boom will be thwarted by Wall Street’s reluctance to approve another drilling spree, shale bosses have warned.
American total oil Production in Trump’s second term will increase by less than 1.3 million barrels per day, Rystad Energy and Wood Mackenzie said, well below the 1.9 million bpd surge achieved under Joe Biden and much less than in shale years to shale during the previous decade.
The executives said investor pressure on companies and the economic realities of a sector still receiving oil prices would be obstacles to Trump’s quest to launch an era of “American energy dominance.”
“The incentive, if you will, to break through, baby, break through. . . I just don’t believe companies are going to do it,” said Wil Vanloh, managing director at private equity group Quantum Energy Partners, one of the shale sector’s largest investors.
“Wall Street will dictate here – and you know what? They have no political agenda. They have a financial program. . . They have no incentive to tell the management teams that run these companies to go deeper,” Vanloh said.
The reality on the ground could be a disappointment for Assetwhich is betting that a big jump in oil supplies can fend off U.S. inflation by making goods and fuel cheaper.
“We are going to lower prices. . . We will be a wealthy nation again, and it is this liquid gold beneath our feet that will help do it,” the president said in his inauguration speech Monday.
In Davos on Thursday, he also called on the OPEC cartel to cut oil prices, suggesting that would allow central banks to cut interest rates around the world “immediately.”
But falling oil and gas prices would make shale companies less profitable — and less likely to follow Trump’s command to “drill, baby, drill,” the executives warned.
“Prices will be a bigger signal than politics,” said Ben Dell, managing partner at Kimmeridge, an energy investment firm that owns shale assets including in Texas’ Permian Basin, the country’s largest oil field. most prolific in the world.
After U.S. oil production hit a record high last year, the Fertive Information Administration expects production to increase only 2.6% to 13.6 million mN/d in 2025 before to increase by less than 1% in 2026 due to price pressures.
Some shale producers are also concerned that the best spots have been exploited after more than a decade of dizzying exploration across states such as Texas and North Dakota.
After his swearing-in ceremony this week, Trump signed executive orders to “unleash” new oil and gas supplies and declare a “national energy emergency.” He also moved to eliminate Biden-era regulations that drillers say have increased their costs and restricted operations.
But leaders warned that even Trump’s full-fledged support for fossil fuels and deregulation could have limited impact.
“As much as the incoming administration is very supportive when it comes to energy and power. . . We don’t see a significant change in activity levels going forward,” said David Schorlemer, chief financial officer of Proetro, a Permian oilfield services company.
The producers’ reluctance comes after two decades of soaring growth – and sometimes punishing oil price volatility.
U.S. oil and gas production has exploded over the past 15 years as drillers have found ways to unlock vast deposits locked in shale rock. Wall Street financed a headlong drilling rush that made the United States the world’s largest producer of oil and gas.
But brutal price crashes in 2014 and 2020 triggered widespread bankruptcies, a more cautious approach by investors and a change in producer behavior – particularly in the face of softer raw prices.
A recent poll from the Federal Reserve Bank of Kansas City found that the average price of U.S. oil needed for a substantial increase in drilling was $84 per barrel, up from about $74 per barrel today.
JPMorgan predicts that U.S. oil prices will drift to $64 a barrel by the end of this year and that shale activity will “slow to a crawl” in 2026.
“If prices are anemic, you can cut out all the red tape you want. It’s not going to move the needle on production,” said Hassan Eltorie, director of corporate and trading 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 crash, budgeting from $14.5 billion to $15.5 billion for 2025, down from $15.5 billion to $16.5 billion last year. Exxon, in comparison, will increase its CAPEX in the coming years.
ConocoPhillips plans to cut spending by $500 million from last year, and Western Oil and Eog Resources must keep activity levels roughly flat – decisions designed to please Wall Street.
“The shareholders of these energy stocks. . . If you do more (capital spending) than they would allow, they will scream bloody murder and sell your stock,” said Cole Smead, managing director of Smead Capital Management, which invests in a handful of oil companies, including Chevron and Occidental Petroleum.