HOUSTON, April 11 (Reuters) – Despite President Donald Trump’s push to boost U.S. oil and gas production on his first day in office, the industry is now facing the possibility of cutting back output and jobs. This shift comes as the country grapples with a surge in crude oil output from OPEC and the uncertainty caused by fluctuating tariffs.
The United States, the world’s largest oil producer, currently pumps about 13.55 million barrels of oil per day, generating millions of jobs and trillions of dollars annually. Trump’s “drill baby drill” campaign slogan and his declaration of a national energy emergency in 2017 were aimed at increasing domestic production. However, the oil market has been jolted by a sharp drop in U.S. crude prices, which fell to nearly $55 a barrel this month from around $78 at the time of Trump’s inauguration. Many companies have stated they cannot profitably drill if oil prices stay below $65 a barrel.
Tariffs imposed under the Trump administration are also making it more expensive to purchase steel and equipment for oil drilling, further discouraging investment unless prices rise significantly.
The oil market, along with broader financial markets, experienced a steep decline in early April when Trump announced new tariffs on trade partners. Shortly after, OPEC and its allies in OPEC+ announced plans to increase oil output, causing U.S. oil prices to drop to their lowest levels since the COVID-19 pandemic’s peak. The U.S. Energy Information Administration (EIA) adjusted its 2025 crude oil price forecast, lowering it to $63.88 per barrel from a previous prediction of $70.68. The EIA also revised global oil consumption growth for 2025, now predicting an increase of 0.9 million barrels per day (bpd), down from an earlier forecast of 1.3 million bpd.
Even before the tariff-driven price plunge, major companies such as Chevron and SLB had already announced layoffs to reduce costs.
“If oil prices fall below $60 and stay there, we will definitely see a reduction in the rig count,” said Roe Patterson, managing partner at Marauder Capital, a private equity firm focused on U.S. oilfield services. “The situation has opened the door for OPEC countries to gain market share here, which is an unintended blow to the U.S. oil industry,” he added.
As of the end of March, the U.S. oil rig count stood at 506, down by 382 rigs from the peak in 2018. If prices remain in the $50 range, some experts predict the rig count could drop by as much as 50%. “If prices settle around $50 for a while, I wouldn’t be surprised to see a 50% decline in rig numbers,” said Cam Hewell, CEO of Premium Oilfield Technologies.
The Dallas Federal Reserve’s survey of over 100 oil and gas companies in Texas, New Mexico, and Louisiana found that most producers need an average price of $65 per barrel to drill profitably. Break-even prices, or the cost of developing a new well, have been estimated at just under $48 per barrel, but when factoring in dividends, debt repayments, and other expenses, the cost rises above $60.
Matthew Bernstein, vice president at Rystad, pointed out that even companies operating in areas with break-even costs as low as $40 per barrel are likely to slow down drilling if prices fall below $65, as their ability to cover dividends could be at risk.
For publicly traded companies, the focus has shifted toward capital discipline and shareholder returns, rather than aggressive growth. While drilling in the best parts of the Permian Basin may cost under $40 per barrel, operations in North Dakota, the third-largest oil-producing state, would require oil prices to hover around $57 per barrel to be profitable, according to Wood Mackenzie.
Rystad and Wood Mackenzie also report that the cost of drilling wells has risen, partly due to the impact of tariffs on steel and other essential equipment. “We have started adding a line item to our invoices to account for the 20% tariffs on parts from China,” said Hewell. “This is making it difficult to maintain costs as the tariffs keep changing.”
Although companies have improved drilling efficiency by reducing drilling time and fracking multiple wells at once, experts believe further significant efficiency gains are unlikely. “While we may see some small improvements, the large leaps in efficiency and technology have already been made,” said Patterson of Marauder Capital.
The future of the U.S. oil industry now hinges on oil prices stabilizing above the break-even point. If prices remain low for an extended period, the industry may face significant challenges in maintaining production levels and securing jobs.
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