2 weeks Ago
Since President Donald Trump announced broad tariffs this month, the price of oil in the U.S. has plummeted to levels not seen since September 2022.
With production at just over 13 million barrels per day, this represents a reduction in gross revenue of $195 million per day for the oil and gas industry — not counting the precipitous drop in natural gas prices, too. It can be said with confidence that this is not what the oil billionaires who backed Trump’s reelection expected to happen. During his first term, Trump — who knew very little about oil and gas — was swayed by the industry to its advantage, and producers thrived.
There was every expectation for a repeat performance in his second term. The industry executives backing Trump again were counting on looser regulations, new tax breaks and the opening up of federal lands for drilling. During his campaign last fall, Trump resurrected Sarah Palin’s “Drill, baby, drill!” mantra and referred to the “liquid gold beneath our feet,” a hackneyed and trite expression.
Trump asked the industry for $1 billion in campaign funding and pledged to unleash oil and gas in the U.S. Candidate Trump also promised his loyal supporters that he would reduce their energy costs by 50% , an arbitrary figure without any plan or data to support it.
Needless to say, his goals for the oil industry and his promises to the average person were diametrically opposed. However, it was readily apparent that none of the oil industry CEOs pulled Trump aside and explained that they had been undertaking a disciplined approach to capital as their investors demanded after the COVID-19 pandemic. The focus for the past four years has been on free cash flow so that debt is paid down, dividends are distributed and share buybacks can occur.
All one needs to do is to read the quarterly earnings reports for publicly traded exploration and production companies: Their emphasis on generating free cash flows jumps off the pages. And since their jobs and bonus structures depend on shareholder satisfaction, you didn’t see major producers substantially increasing their capital investments. We’ll probably even see a reduction.
Why would the industry greatly increase drilling and production activity that could lead to lower prices? So, in reality, there will be no “drill, baby, drill!” The oil and gas industry applauded the appointment of Chris Wright, the CEO of a hydrofracturing service company, to the position of U.S. secretary of energy.
They would now have an advocate with a front-row seat in the new administration. How would Wright balance Trump’s conflicting promises to industry and the average consumer? It didn’t take long for Wright to be quoted as saying the White House would like to see $50 oil , a price level that Wright personally knows would be devastating to the oil and gas industry. And, while Wright’s newly adopted view was surprising, what the industry never expected was the damage Trump would cause with his scattershot approach to increasing federal revenue via tariffs which are, by nature, inflationary despite the administration’s statements to the contrary.
Irony of embarrassing wealth wiped out We also know it wasn’t just oil industry executives who were backing Trump. Wall Street had a good run during Trump’s first term and expected the same the second time around. Many voters, too, looked beyond Trump’s history and voted with their bank accounts and stock portfolios in mind.
There was a “Trump bump” right after the election, and inflation was cooling. In essence, Trump could only damage the improving economic conditions he inherited. Trump used to point to Wall Street indexes (when they were high) as a barometer of his success in office.
Now, he doesn’t look at them. So, the question needs to be asked: Where are all the billionaires who supported Trump and are now seeing a domestic and global economic meltdown? By the nature of their own successes, they have a better grasp of today’s worldwide economic interdependencies than Trump and are seeing the results of his erratic decision making. The irony of how much of their wealth has just been wiped out cannot be understated.
Many gave him their unwavering support lest they face his wrath. But what were those fears founded upon? Did they think their wealth would shrink? What was really at stake for those who had amassed embarrassingly large wealth if they went against Trump? Whether publicly or privately, it’s time for them to band together and demand a meeting with the White House to stop this madness. They helped put him in office and only they, together, can influence the direction of the U.
S. economy going forward. Do you have an opinion on this topic? Tell us! We love to hear from Texans with opinions on the news — and to publish those views in the Opinion section.
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