What's New

On the campaign trail to the 2024 elections, Donald Trump made affordable energy for Americans a top priority—along with a boost for the country’s energy industry with a view to “energy dominance”. Now, conflicts are emerging between these priorities, making it difficult to follow them all.

Two of President Trump’s energy goals are compatible enough: cheaper oil makes for greater demand both at home and abroad, so cheap gasoline for Americans can go hand in hand with growing U.S. energy dominance through exports. The latter are being boosted through sanctions on Russia and pressure on India to switch from Russian to U.S. crude, and it’s working. The Venezuelan takeover will also go towards expanding the share of U.S. oil in the global mix.

In liquefied natural gas, the dominance is even more pronounced. Last year, the United States became the first country to export over 100 million tons of the superchilled fuel, largely thanks to shipments to Europe. There is a certain sense of irony in this situation because the European Union has adopted a new methane regulation that could see LNG deliveries from the Gulf Coast take a dip because of the effect the regulation will have on prices. U.S. Energy Secretary Chris Wright has already called for its removal twice—as has Qatar’s energy minister.

Energy affordability, then, is perfectly compatible with energy dominance. The third priority, however, boosting the energy industry, is proving tougher to fit in with the other two—because oil and gas companies do not really thrive at low oil and gas prices. And when oil and gas companies don’t thrive, they start reducing production, which lifts prices, and there goes the affordable energy goal, along with the dominance, which needs the price-sensitive energy importers such as India to grow.

The United States is the world’s biggest producer of crude oil and natural gas. The industry got to that position despite four years of a rather hostile federal government, proving that it can survive and do well even without the support of Washington. But, of course, such support is always welcome—up to a point.

Some expected oil and gas producers to go on a drilling spree once Trump was elected, but instead, they remained cautious. That new normal of strict capital discipline and pickiness about new investments was not a passing fad. It is, quite literally, the industry’s new normal. This is what prompted Exxon to call Venezuela “univestable” after the U.S. president prompted oil majors to go in and spend $100 billion to make Venezuelan oil great again over the next ten years.

Wood Mackenzie said earlier this month that upstream capex fell globally last year and is about to fall further this year—notably including in the United States. Despite the full support of the federal government. Despite the energy dominance agenda of the White House. Many are citing uncertainty about the years after Trump’s second term ends, and they are right to be worried about who will replace him. Caution is the new “Drill, baby, drill” in the oil and gas patch.

There are, however, fundamental factors at play as well. With all the predictions of a massive global oil glut, an oil company would be justified in not drilling at will. Weak prices are also not conducive to production growth, as evidenced by the slowdown in drilling activity last year. Of course, some of that was better efficiency that drove still-higher production, but the rate of growth in production has slowed substantially.

The energy dominance priority is also a bit complicated. In liquefied gas, for instance, the United States has become heavily reliant on Europe, which has been taking in over half of U.S. exports. Now, part of that surge in purchases has been an attempt to please President Trump and get better trade deal terms, which did not happen. Another part is that the EU does not really have many options, and it will have one fewer soon after the ban on Russian gas imports comes into effect. The U.S. and Europe, in other words, are dependent on each other in LNG. Even so, Asia remains a major market as well, and demand for energy from the tech sector amid the AI frenzy is rather bullish for demand—and for that dominance agenda.

In crude oil, there is no such close interdependency with a group of buyers, but there is more competition, notably from OPEC+ but also from non-OPEC producers. None of these comes even close to the production rates of the U.S., but they do add to a market that most analysts say is already oversupplied. This oversupply situation, coupled with the intense competition in oil, makes the dominance goal harder to achieve—and doesn’t do anything about the industry’s job satisfaction levels. The three energy priorities of the Trump administration, while individually admirable, are tricky to turn into reality all at once—because some come at the expense of others.

By Irina Slav for Oilprice.com