“Drill, Baby, Drill” Did Not Work: From Savior to Gravedigger — Donald Trump’s Transformation
In the United States of America, the number of active oil and gas drilling rigs fell to 578 units by the end of the first week of May, down from 586 units in April. This represents the lowest level since the beginning of the current year. According to Baker Hughes, this figure is 4 percent lower than during the same period last year.
In its May oil market report, the United States Department of Energy lowered its forecast for national oil production to 13.42 million barrels per day for this year and 13.49 million barrels per day for next year (compared to previous projections of 13.51 million and 13.56 million barrels per day, respectively).
At first glance, this seems surprising, considering that Donald Trump, who has consistently supported the domestic oil and gas sector, is once again in power. In January of this year, he declared a state of emergency in the American energy sector, which—at least on paper—allowed federal agencies to overlook many environmental regulations and to begin issuing licenses for new drilling and the construction of extraction and transport infrastructure. These decisions directly affected the development of new fields and the construction of pipelines.
Unfortunately, however, the trade wars initiated by President Trump have created a hostile environment for the growth of U.S. oil and gas production. According to Bloomberg, Trump’s economic policies have increased the cost of purchasing and repairing extraction equipment. Moreover, the price of oil has declined by more than 20 percent since Trump’s inauguration.
The energy transition strategy of former President Joseph Biden had already created many difficulties for the U.S. oil and gas industry. The federal government halted the issuance of licenses for new liquefied natural gas (LNG) projects, paused approvals for drilling and exploration on federal lands, and canceled key hydrocarbon transportation projects, including the Keystone XL pipeline from Canada.
The return of Donald Trump to the presidency was initially welcomed by both large corporations and small firmsin the oil and gas sector. His campaign slogan — “Drill, Baby, Drill!” — resonated strongly with the industry.
However, Trump’s trade wars with nearly every major global economy have destabilized the global supply-and-demand balance for oil. Risks have grown especially in regard to demand from the People’s Republic of China, one of the world’s largest oil consumers.
As Andy Hendricks, Chief Executive Officer of Patterson-UTI Energy Inc. (the second-largest operator of land-based drilling rigs in the United States), stated:
“You cannot follow a ‘Drill, Baby, Drill’ strategy with oil prices at 50 United States dollars per barrel. These two things are simply incompatible.”
Additional pressure on oil prices comes from outside the United States. For example, OPEC+ has decided to gradually increase production starting in April, ending years of coordinated production restraint. The alliance has pledged to increase production by 411,000 barrels per day in June, which is three times the initially planned increase. In total, up to 2.2 million barrels per day are expected to return to the global market. This raises the risk of a market surplus, putting downward pressure on oil prices.
Saudi Arabia, the Russian Federation, and other oil producers can afford to operate profitably at 50–60 dollars per barrel due to lower production costs. But in the United States—where nearly two-thirds of production comes from shale operations—this is a major problem. A West Texas Intermediate (WTI) price of 55 dollars per barrel is well below the breakeven point for many shale companies, deterring investment and leading to a decline in rig activity.
Trump inherited the U.S. oil industry at its peak, with production approaching 13.5 million barrels per day. But within four months of his inauguration, companies began to cut staff, shut down rigs, and reduce capital expenditures to cope with rising costs and declining revenues.
So far, Trump has not signaled any plans to support higher oil prices, leaving companies hesitant to develop new wells due to uncertainty and fear of financial losses. The number of active rigs in Texas is currently lower than during the post-pandemic recovery in 2020. Trump’s tariffs against China and other nations have also increased operational costs for U.S. oil fields, discouraging companies from investing in production growth.
The Chief Executive Officer of Diamondback Energy Inc., the largest independent producer in the Permian shale basin (which spans West Texas and eastern New Mexico), stated:
“We cannot justify expansion under these conditions.”
In an interview with Neftegaz i Kapital, Igor Yushkov, an analyst at the National Energy Security Fund and expert at the Financial University under the Government of the Russian Federation, said:
“Trump has alienated many of his former allies in the oil and gas sector. He signed a number of executive orders—especially those opposing green energy—but failed to follow through with necessary regulatory frameworks.”
Yushkov added:
“The price of West Texas Intermediate (WTI) is currently below 60 dollars per barrel, and that is a problem. Either prices rise, making previously unviable fields profitable, or they remain low, reducing fuel costs but also discouraging production. Thanks to the shale revolution, the United States has long acted as a swing supplier—increasing output when prices rise and scaling back when they fall.”
“But now, under Trump, even that balancing role is being undermined,” Yushkov concluded.
