Donald Trump’s call for a new oil boom will be stymied by Wall Street’s reluctance to approve more drilling, shale bosses have warned.
Total U.S. oil production in Trump’s second term will rise by less than 1.3 million bpd, Rystad Energy and Wood Mackenzie said, well below the 1.9 million bpd increase achieved under Joe Biden and much less than in the shale production years. the previous decade.
Executives said investor pressure on companies and the economic realities of a sector always beholden to oil prices would hamper Trump’s bid to usher in an era of “American energy dominance.”
“Encouragement, if you will, just drill, honey, train . . . I just don’t believe companies are going to do it,” said Wil VanLoh, chief executive of private equity group Quantum Energy Partners, one of the shale sector’s biggest investors.
“Wall Street is going to dictate here – and you know what? They don’t have a political agenda. They have a financial agenda. . . They have zero incentive to basically tell the management teams that run these businesses to go and drill more wells,” VanLoh said.
The reality on the ground could be a disappointment to Trump, who is betting that a big increase in oil supplies could curb US inflation by making commodities and fuel cheaper.
“We will lower the prices. . . We will be a rich nation again, and it’s that liquid gold under our feet that will help make that happen,” the president said in his inaugural address on Monday.
In Davos on Thursday he also called on the OPEC cartel to lower oil prices, suggesting this would allow central banks to cut interest rates around the world “immediately”.
But lower oil and gas prices will make shale companies less profitable — and less likely to follow Trump’s order to “drill, baby, drill,” 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 Texas’ Permian Basin, the world’s most prolific oil field.
After U.S. oil production hit a record high last year, the Energy Information Administration expects output to rise just 2.6 percent to 13.6 million barrels a day in 2025 before rising by less than 1 percent in 2026 due to price pressures.
Some shale producers are also worried that the best places have been tapped after more than a decade of risky exploration in states like Texas and North Dakota.
After his swearing-in ceremony this week, Trump signed executive orders to “release” new supplies of oil and gas and declare a “national energy emergency.” He has also moved to eliminate Biden-era regulations that drillers say raised their costs and limited activity.
But executives warned that even Trump’s full support for fossil fuels and deregulation could have limited impact.
“As far as the next administration is very favorable to power and energy. . . we don’t see a significant change in activity levels going forward,” said David Schorlemer, chief financial officer of ProPetro, a Permian oilfield services company.
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Producers’ reluctance comes after two decades of rising — and sometimes punishing — oil price volatility.
U.S. oil and gas production exploded in the past 15 years as drillers found ways to unlock vast deposits locked in shale rock. Wall Street financed a headlong drilling race that made the US the world’s largest oil and gas producer.
But brutal price crashes in 2014 and 2020 prompted widespread bankruptcies, a more cautious approach by investors and a shift in producer behavior — especially in the face of softer crude prices.
A recent study by the Kansas City Federal Reserve found that the average U.S. oil price needed for a significant increase in drilling was $84 a barrel, compared with about $74 a barrel today.
JPMorgan predicts that US oil prices will fall to $64 a barrel by the end of this year and shale activity will “slow to a crawl” in 2026.
“If prices are anemic, you can cut out all the red tape you want. It won’t move the needle on manufacturing,” said Hassan Eltorie, director of companies and transactions research at S&P Global Commodity Insights.
America’s second-largest oil producer, Chevron – a major shale investor – plans to cut spending this year for the first time since the pandemic oil crash, budgeting $14.5-15.5 billion for the year 2025, from $15.5-16.5 billion last year. By comparison, Exxon will increase its capital in the coming years.
ConocoPhillips expects to cut spending by $500 million from last year, and Occidental Petroleum and EOG Resources will 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, chief executive of Smead Capital Management, which invests in a handful of companies of oil, including Chevron and Occidental Petroleum.
