The News Republic
The
Trump administration hasn’t been great for the oil industry. In its quest to
“drill, baby, drill” and expand trade wars, the White House has also sent fuel
prices tumbling and brought about what could be the industry’s most tumultuous
period since the onset of the Covid-19 pandemic. Although the prospect of lower
gas prices might hold some populist appeal, cheap oil is potentially disastrous
for the companies responsible for actually getting those products to the pump;
drilling here is expensive, and low prices mean that many firms could struggle
to break even. Tariffs are making it more expensive to build and maintain rigs,
while the general chaos of Trumponomics 2.0 threatens to bring about a
recession that would crater already sluggish demand. A new report from the
energy consultancy Wood McKenzie notes that if prices fall below $50 per
barrel, domestic production could decline by up to 1.2 million barrels per day
by 2026. The International Energy Agency has slashed its forecast for oil
demand growth by nearly a third since last month and projects oil supply will
outstrip demand by the greatest amount since 2020.
Despite oil and gas executives’ blistering criticism of
Trump’s policies, the White House seems determined to stay the course. Few have
been more enthusiastic about that project than Interior Secretary Doug Burgum.
This week, he announced plans to loosen rules on the types of drilling
companies can do in the Gulf, overhaul federal leasing, and open up new areas
for oil and gas extraction, in line with Trump’s move to reverse Biden
administration bans on drilling in parts of the Pacific and Alaska. The
Department will further implement “emergency permitting procedures” to
fast-track leasing, production, transportation, and refining for oil, gas, coal,
and several other commodities. A draft strategic plan obtained by journalists
at the investigative Substack outlet Public Domain outlines plans to “treat
national resources as national assets,” prioritizing oil and gas development
and peeling back regulations. With the help of the Department of Government
Efficiency and longtime oilman Tyler Hassen—now serving as assistant secretary
of policy management and budget, or AS-PMB—Burgum is planning on “unifying and
consolidating” key departmental functions. The ultimate goal is to create
“significant efficiencies across the Department by improving processes,
eliminating redundant efforts, and helping integrate technology adoption.” Mass
layoffs are expected to begin early next month. Many of these plans, though, seem bizarrely out of touch
with what the industry seems to actually want. Take Burgum’s plan to expand
drilling in the Gulf. Verite News reporter Tristan Baurick notes that only a
fifth of active drilling leases there are currently producing oil, per Bureau
of Ocean Energy Management records. Given gloomy price and demand projections,
how will selling off more of those leases spur production? “It’s not the
regulations that are getting in the way, it’s the economics,” Hugh Daigle, a
professor of petroleum engineering at the University of Texas in Austin, told
Baurick. “It’s true that there are a bunch of undeveloped leases in the Gulf,
and it’ll stay that way if we continue to see low or stagnant oil prices.” Shares in the oilfield services firm Halliburton plummeted
earlier this week as company executives warned about the impact of tariffs and
lower oilfield activity on its bottom line. Halliburton Chief Executive Jeff
Miller said, on a quarterly earnings call with investor analysts, that
customers in North America are “are in the midst of evaluating their activity
scenarios, and plans for 2025 activity reductions could mean higher than normal
white space for committed fleets and in some cases, the retirement or export of
fleets to international markets.” (White spaces refer to periods when the
company’s equipment isn’t booked for use.) One oil and gas executive put it
more bluntly, responding to the Federal Reserve Bank of Dallas’s anonymized
quarterly survey of the industry, released late last month. “There cannot be
‘U.S. energy dominance’ and $50 per barrel oil; those two statements are
contradictory,” the executive wrote. “At $50-per-barrel oil, we will see U.S.
oil production start to decline immediately and likely significantly.” For as long as it’s existed, the U.S.
oil and gas industry has depended upon a complex array of government support
that reaches well beyond long-standing tax breaks. Over the last century,
executives have routinely relied on local, state, and federal officials to
stabilize prices, fund basic research, and open up markets for their products
abroad. The Department of Interior plays an important part in that. The federal
government, that is, provides a long view that industry insiders chasing
short-term returns tend to lack. As Burgum and his colleagues in Trump’s
Cabinet take a chain saw to supposed government waste, they risk kneecapping
the bureaucracies that help keep his favorite industry afloat.
The White House’s ideological crusades, in other words—to
downsize government, tear up regulations, and get as many fossil fuels out of
the ground as possible—are increasingly divorced from the interests of the
industry it claims to be defending. Despite being stocked with and paid for by
oil and gas executives, the Trump administration might end up doing more damage
to America’s fossil fuel industry than Democrats’ alleged “Green New Scam” ever
dreamed of.