U.S. oil producers are stuck between President Donald Trump’s policies, benefiting from relaxed environmental regulations but facing weakening oil prices as tariffs weigh on the global economy.
The result: Trump’s hopes that domestic oil producers “drill, baby, drill” could soon be dashed.
The price for a barrel of U.S. benchmark oil has largely been below $65 since Trump announced in early April that he would implement widespread tariffs on nearly all U.S. trading partners, according to the U.S. Energy Information Administration. Plans for new tariffs — some of which Trump paused — have dimmed many economic forecasts while mostly not targeting oil.
Analysts with Rystad Energy wrote in a note Wednesday that Trump’s ongoing trade war with China and other countries could lead to a 15 percent reduction in GDP growth in 2025 — a drop they said could lower oil demand growth by about 50 percent compared with their pretariff estimates. Oil companies typically produce more when the market price for a barrel is at least $70 and wind down production when prices get closer to $50 a barrel, said David Carter, industrials senior analyst with the RSM US accounting firm.
“We’re stuck in that limbo right now while we figure out how do we operate in these times that are near break-even,” Carter said.
EIA, which is part of the Department of Energy, last week lowered its forecast for oil prices through 2026 — estimating that barrel of the benchmark West Texas Intermediate crude will cost about $56 by the end of 2026, compared with their previous estimate of $62.50.
EIA also reduced forecasts for U.S. oil production through 2026. Domestic crude output may be 13.56 million barrels a day in 2026, the agency said, or a drop of about 1.5 percent from an earlier forecast for next year. Trump has called for ramping up U.S. oil and gas production, which reached record levels under former President Joe Biden.
The White House did not respond to a request for comment about lower oil prices and potentially lower domestic oil production. DOE referred POLITICO’s E&E News to a recent Bloomberg TV interview with Energy Secretary Chris Wright.
In the interview, Wright dismissed predictions of a slowdown of demand growth for oil as rumors that are “older than I am,” saying he believes oil prices will rebound.
“You see a marketplace right now that is worried about economic growth. And I think you’re seeing some softening in oil prices from that,” Wright said. “But I think that fear, I think that fear is misplaced. I think we’re going to end out in a better economic situation than we went into this Trump term, I think, by a long shot.”
Oil producers in Texas, southern New Mexico and northern Louisiana said they need prices to be between $61 and $70 a barrel to profitably drill a new well and about $41 a barrel to cover operating expenses for existing wells, according to the Federal Reserve Bank of Dallas’ first–quarter survey released in March.
Oil production costs are also expected to rise, as more than 60 percent of oil and gas producers expect Trump’s trade policy changes to increase their operating costs, according to a Federal Reserve Bank of Kansas City energy survey released last week. At the same time, about 44 percent of energy executives polled by the Kansas City Fed think those trade policies will lower oil demand and decrease their revenues over the next year.
EIA and BloombergNEF also issued analyses this week showing that an energy transition may slow but still continue in the United States.
DOE spokesperson Andrea Woods released a statement blaming EIA’s new outlook on policies seen under Biden. Woods said DOE “is charting a new way forward for America’s energy future” under Trump that promotes more consumer choice and “expands economic growth fueled by American energy dominance.”
‘A tough place’
Razan Hilal, a market analyst for Forex, a foreign exchange market, said the tariffs have caused volatility in oil prices as forecasters and energy officials wait to see how Trump’s tariffs will affect the global economy. Oil prices tend to decline during recessions or global economic slowdowns, as fewer people travel.
Hilal said she expects oil prices to remain relatively stagnant until Trump’s pause on imposing many of the new tariffs expires in July.
“The volatility may pause for a bit until the headlines clear out,” she said.
Another factor weighing on prices is OPEC+’s announcement earlier this month that member countries plan to increase production by more than analysts had originally expected. That could soon lead to a global glut of crude, especially if a recession hits, according to a report released Tuesday by the International Energy Agency.
Trump and his administration have argued that U.S. production will increase as agencies slash regulations around oil and gas production. Interior Secretary Doug Burgum said at an energy conference in March that actions to deregulate the industry could save producers $6 to $8 a barrel.
Nearly half of all producers polled by the Dallas Fed in its energy survey, however, said that their costs for regulatory compliance added up to less than $2 a barrel. More than 90 percent said it was less than $6 a barrel.
At the same time, Peter Navarro, one of Trump’s main trade advisers, has often said the administration hopes to push oil prices to about $50 a barrel. That’s a number that would lead oil companies to cut production, according to Carter with RSM.
“I think oil and gas companies are in a tough place,” Carter said. “Historically, they benefit from some of the deregulation, but by the same token they’re struggling from the administration’s pressure to drive oil prices, which doesn’t help them.”
Still, energy executives have largely remained quiet on how Trump’s trade war and the administration’s push to lower oil prices are affecting their bottom lines — at least in public. Oil and gas executives were among the major donors who supported Trump’s presidential run in 2024, though their contributions were dwarfed by Tesla CEO Elon Musk’s spending.
Executives who were polled anonymously in both the Dallas and Kansas City Feds’ energy surveys said uncertainty was making it more difficult for them to make financial decisions.
“There cannot be ‘U.S. energy dominance’ and $50 per barrel oil; those two statements are contradictory,” one executive wrote to the Dallas Fed, which does not name executives so they can speak more freely.
The American Petroleum Institute, a U.S. oil and gas trade association, said officials are working with the Trump administration to support the industry.
“Like every sector of the economy, we are monitoring global markets closely,” wrote Bethany Williams, an API spokesperson, in a statement to E&E News. “We will continue to engage the administration and our partners around the world on trade policies that support American energy dominance.”
Carter said larger companies may have more to say about Trump’s tariffs in their next quarterly earnings calls, which are scheduled for the coming weeks.
“They’re having to, I think, temper their commentary in the middle of all the uncertainty because nobody wants to be the person who their sticks their thumb out first to criticize the administration only for things to play out well for the industry and then it backfires on them,” Carter said.
