Oil drilling rig in the Permian Basin. – Justin Hamel/Bloomberg News
The oil-and-gas industry uncorked the champagne after Donald Trump won the election. Now, it’s debating whether the glass is half full or half empty.
Some companies are asking the administration not to lay off key personnel who deliver permits at federal agencies, including the Interior Department, which has already fired hundreds of workers. President Trump’s steel tariffs are set to raise drilling expenses for shale companies. And perhaps most important, oil bosses have to contend with the administration’s focus on lowering crude prices to industry-busting levels.
The Organization of the Petroleum Exporting Countries, which Trump asked to pump more oil, announced earlier this month that it would start increasing production. U.S. crude prices have fallen about 6% in the past month to around $68 a barrel. Companies would likely slow drilling if prices were to fall below $60.
Trump’s whirlwind policy moves have elicited some head-scratching among business leaders. They have been especially jarring for the oil-and-gas industry, which gave tens of millions of dollars to Trump’s 2024 campaign as he pledged to make fossil fuels a centerpiece of his agenda. Oil billionaires encouraged him to dismantle environmental rules and help them build new pipelines.
Energy executives at a major Houston energy conference last week hailed Trump’s flurry of executive actions, which aim to support the production and export of fossil fuels. But even those enthused about his moves said their industry is entering turbulent times.
“I think the tailwinds are going to be a little gusty for a while, and a little volatile,” Alan Armstrong, chief executive of pipeline company Williams, said in an interview on the sidelines of CERAWeek by S&P Global.
The chief executives of U.S. oil giants Exxon Mobil, Chevron, ConocoPhillips, Hess and others met with Trump on Wednesday at the White House largely to discuss reforms to the country’s complex permitting processes. After the meeting, Interior Secretary Doug Burgum said the executives didn’t discuss oil prices with the president.
A major concern for energy executives is the Trump administration’s axing of federal workers. Their companies receive permits to drill on U.S. lands from Interior’s Bureau of Land Management, licenses to export liquefied natural gas from the Energy Department, and permits to build interstate natural gas pipelines from the Federal Energy Regulatory Commission.
Freeport LNG facility in Texas. – Arathy Somasekhar/Reuters
The administration has fired thousands of probationary employees including at Energy and Interior. About 250 Bureau of Land Management employees have lost their jobs, according to the National Treasury Employees Union, which represents workers there.
Oil and gas firms have long complained about what they describe as understaffing and slow permitting at the Bureau of Land Management. Some oil lobbyists said they are worried the Trump administration’s Department of Government Efficiency’s cost-cutting efforts will exacerbate the issues, and that they have communicated their concerns to administration officials.
Matt Schatzman, CEO of LNG company NextDecade, said his company is using its ins in the White House to relay the message that the administration should be hands-off with the agencies central to Trump’s “energy dominance” agenda.
“If those people leave, we can’t just hire a bunch of folks out of college and think they can do this overnight,” he said. These agencies should hire more workers and cut red tape so the industry can start more projects as quickly as possible, he said.
Also unsettling energy companies are 25% tariffs on imports of steel, a central component of their operations. Shale companies use thousands of miles of steel pipes every year to drill horizontal wells. Some firms, such as Devon Energy, recently told investors that they expect to see at least a minor impact from the tariffs.
After the U.S. imposed tariffs on China, that country retaliated by declaring 15% tariffs on U.S. LNG. Michael Smith, the CEO and founder of natural gas exporter Freeport LNG, said he’s concerned the tariffs will affect long-term sales of American gas into China.
“That’s just only a portion of the market, but it will have an effect,” he said in an interview.
Oil and gas executives say they believe Trump’s actions might inflict short-term pain to the industry, but that he will ultimately help restore investor appetite for the sector and help it lock in demand for its products through new pipelines and export terminals.
“President Trump reaffirmed his commitment to restore America’s energy dominance and drill, baby, drill,” said Taylor Rogers, a spokeswoman for the White House, in reference to the president’s meeting with oil executives this week.
At a dinner in Houston last week, Burgum, the interior secretary, told a gathering largely of oil CEOs that he would help clear their project roadblocks. But in private meetings, some executives have said Trump’s rapid policy changes and desire for cheap crude are blurring the line of sight they say they need to make long-term investments, according to people familiar with the discussions.
Some executives said they have encouraged administration officials to cement Trump’s policies through the legislative process, so that the changes that benefit them will endure beyond his second term.
“You’ve got a chance to leave a legacy,” said Pierce Norton, chief executive of pipeline company Oneok.
As Trump touted his plans during his campaign to expand drilling, oil executives stressed that they wouldn’t increase production, which would lower prices, stress their inventories and displease their investors. Still, administration officials have kept pushing this agenda item, with senior adviser Peter Navarro saying on Fox News earlier this month that prices falling to $50 a barrel would help tame inflation.
In an interview, Energy Secretary Chris Wright reaffirmed the administration’s goal to produce more energy and lower energy prices. He said Trump’s embrace of fossil fuels reduces the cost and uncertainty of oil and gas production.
“Since his election we’ve seen a drift down in oil prices, and I think that’s a positive development,” he said.
Scott Sheffield, the former CEO of Pioneer Natural Resources—now part of Exxon Mobil—said that American crude production could decline if U.S. prices plummet to $50 a barrel. The industry would likely adapt by consolidating and doing mass layoffs, he said.
“What project in the Gulf of Mexico is gonna be drilled at $50 oil? None.”
Write to Benoît Morenne at benoit.morenne@wsj.com and Collin Eaton at collin.eaton@wsj.com
