The US oil industry rejoices over Donald Trump's return and his promises of deregulation. Expectations for an "oil revolution" are high.
A dream for the oil industry – or not?
While the oil industry would like to put the "regulatory wave" of recent years under Joe Biden behind it, experts do not expect a massive increase in production. The reason: The days of debt-driven drilling are over. Companies like Halliburton and API see potential if environmental regulations are lifted and new areas for development, such as the Gulf of Mexico and protected land areas, become accessible. But the investors, especially on Wall Street, have a different goal: capital discipline and returns.
Jeff Miller, CEO of Halliburton, nevertheless expressed optimism: "This could only be positive. In fact, I am very optimistic." The president of the American Petroleum Institute, Mike Sommers, announced that the "regulatory assault" of recent years will now come to an end. The emission standards and protection measures for endangered species introduced by Biden could soon be history. Trump also plans to cut corporate taxes and abolish Biden's "Inflation Reduction Act," a controversial climate law.
Price and Wall Street Regulate Oil Production – Not the President
Analysts, like Jim Burkhard from S&P Global, are skeptical. "Price and Wall Street are the regulators of US production, not the President." During Biden's term, the production volume has already reached record highs - in August alone, it was at 13.4 million barrels per day. Yet despite Trump's deregulation push, experts only expect a slight increase to 13.6 million barrels per day by 2025.
But Trump still has an ace up his sleeve: geopolitics. He has announced that he will increase pressure on Iran and impose new sanctions on its oil exports. While this measure could raise oil prices in the short term, an excess supply on the market could drive prices down again. In his first term, Trump already demonstrated that he is willing to put pressure on OPEC countries to lower or raise prices as needed.
The Dilemma of the US Shale Oil Industry
Trump faces a challenge: Low oil prices may please consumers, but they could be devastating for the U.S. shale oil industry. Trump learned this lesson in 2020 when he pushed OPEC to cut production to save U.S. oil firms from bankruptcy. Bob McNally, president of the Rapidan Energy Group and former energy advisor to the Bush administration, aptly summarizes the dilemma: "Low oil prices may appeal to consumers, but they harm the U.S. shale oil sector.
Even if Trump dismantles environmental protection laws, industry experts like Paul Bledsoe expect that major oil companies will continue to invest in clean energy and emissions reductions. "The public expectation and investors' expectations for emissions reductions won't disappear just because Donald Trump was elected.
The hope for a "permission revolution
A hotly debated topic in the oil industry is the reform of the permitting process.
But the question remains: Will Trump keep the promises he made to the US oil industry?
