In his remarks at this week’s U.N. Climate Week conference, President Donald Trump reminded the U.N. general assembly that “we have an expression, ‘drill, baby, drill.’ You know, that’s what we’re doing.”
But according to almost 80% of the dozens of shale oil executives who responded to the third quarter survey of oil and gas companies by the Dallas branch of the Federal Reserve, that’s all about to come to an end thanks in large part to the President’s focus on cutting oil prices as a means of controlling inflation.
“The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch,” one executive said. Another warns that “drilling is going to disappear.”
Executives at oilfield service companies aired similar concerns, pointing to recent layoff announcements as a symptom of the current market environment. “A vibrant oilfield services sector is critical if and when the U.S. needs to ramp up production,” one says, adding, “Right now we are bleeding.”
One upstream company executive was especially angry at the administration, writing that the business “has been gutted by political hostility and economic ignorance. The previous administration vilified the industry, buried it in regulation and cheered the flight of capital under the environmental, social and governance banner…Now the current administration is finishing the job.”
The confidential format of the Dallas Fed’s quarterly surveys encourages the executives to speak bluntly in their responses, and the airing of such grievances is often the result. Most would no doubt temper their language in a meeting with the President or his senior officials, and other respondents did just that, noting that their industry and companies have been buffeted this year by an array of factors, both domestically and internationally.
“There are a variety of issues affecting our business,” one respondent points out. “First, excess in the global oil market is restraining oil prices near term. Second, there is continued uncertainty from OPEC+ unwinding production cuts. Third, trade and tariff changes and the resulting geopolitical tensions.”
He or she isn’t wrong. While shale drillers and producers have no doubt been frustrated by the constantly shifting tariff situation as the White House works out trade deals with dozens of countries, there are other major market factors well beyond any U.S. president’s control. The uncertainty around tariffs has without question increased industry costs, especially as they relate to tubular goods and other steel and aluminum products that are integral to their operations. But at the same time, there can be little doubt that the monthly machinations of the OPEC+ cartel have created a much larger impact on driving down the price of crude oil and thus, driving down company profits.
As for the geopolitical tensions the responder mentions above, Joe Biden’s four years in office were chock-full of such issues, many of which were left behind for Mr. Trump to deal with and resolve. The simple truth is that there has never been a time during its 166-year history that the U.S. oil and gas industry didn’t have to deal with such complications.
The oil business is an infamously cyclical one, as anyone who has been in it for more than a year understands. I spent more than 40 years in the industry and would need to use fingers on more than one hand to total up the number of boom-and-bust cycles that took place during that span.
The fact is that drilling levels in the United States have been on a steady decline since late 2018 in response to prevailing market factors far more than to the policies of the Biden or Trump administrations. As I pointed out shortly after last November’s election, the maturity of every major shale play meant that there would be no revival of “drill, baby, drill” in a second Trump presidency regardless of the administration’s policy direction. It just was never going to be in the cards.
The grievances and frustrations aired by these executives are entirely understandable: It’s a tough business that is impacted for better or worse by public policies. But pointing the finger of blame at Trump is a simplistic reaction to a highly complex set of circumstances.
David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
(Featured Image Media Credit: Screen Capture/PBS NewsHour)
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