Unlock the White House Watch newsletter for free
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 shortlived. The only thing gushing in the oil patch is rhetoric.
The recent increase in shale oil and gas production in the United States has been touted as a major success of the Trump administration’s energy policies. However, it is important to recognize that this shale boom is not solely the result of Donald Trump’s actions, and it is not his gift to give.
The shale boom has been driven by a combination of technological advancements, market forces, and the hard work of countless individuals in the energy industry. Hydraulic fracturing, or “fracking,” has revolutionized the extraction of oil and gas from shale formations, making previously inaccessible reserves economically viable.
Furthermore, the shale boom is a result of private sector investment and innovation, not government intervention. While the Trump administration has rolled back regulations and opened up federal lands for drilling, the majority of shale development has occurred on private lands and was already well underway before Trump took office.
It is important to recognize that the shale boom is not a gift from any one individual or administration. It is the result of a complex interplay of factors that have come together to create a thriving industry. While Trump may claim credit for the increase in shale production, it is important to remember that this boom is not his to give – it is a product of the hard work and ingenuity of the American energy sector.
Tags:
shale boom, Donald Trump, US economy, energy industry, fracking, oil production, natural gas, energy policy, economic growth
#shale #boom #Donald #Trumps #gift #give
You must be logged in to post a comment.