Every quarter the Federal Reserve Bank of Dallas surveys oil and gas executives, gauging how the top brass feel about the present and future of their industry. During the Biden years, the qualitative portion of these surveys—anonymous comments submitted to Fed researchers—railed against Democrats and their supposed persecution of fossil fuel producers. In the most recent survey, released on Wednesday, oil and gas executives tear into a new target: Donald Trump.
“The administration’s chaos is a disaster for the commodity markets,” one executive at an exploration and production, or E&P, firm writes. “‘Drill, baby, drill’ is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn’t have a clear goal. We want more stability.” Another adds that, “I have never felt more uncertainty about our business in my entire 40-plus-year career.”
While fossil fuel companies are reliably Republican—and strongly backed Trump’s reelection campaign—his half-baked plan for “U.S. energy dominance” could hurt their bottom line. Much of the oil produced in the United States is extracted through fracking and other “unconventional” means. These are relatively expensive ways to drill for oil and gas, requiring big, frequent injections of cash. Drilling as much as possible as quickly as possible—what the Trump administration says it wants to do—threatens to flood the market, driving down prices at the pump. Lower fuel costs might be welcome news for consumers but also mean that drillers, especially small and midsize firms, which operate on tighter margins than big players like ExxonMobil or Chevron, could find it more difficult to break even. You don’t have to take my word for it, though. Executives are fuming. “The rhetoric from the current administration is not helpful,” one commented. “If the oil price continues to drop, we will shut in [i.e., decrease] production.”
Houston C-suiters are particularly worried about prices amid rising interest rates and production costs. Trump’s tariffs on steel, especially, are pushing those costs even higher. According to one survey respondent, the tariff announcement “immediately increased the cost of our casing and tubing by 25 percent even though inventory costs our pipe brokers less. U.S. tubular manufacturers immediately raised their prices to reflect the anticipated tariffs on steel.”
Making matters worse is the fact that no one seems to know which tariffs will be in place a week or a month from now; the White House continues to announce tariffs, back down from them, then announce even steeper ones at a rapid clip. Broader uncertainty about where the economy is headed—and oil demand and prices along with it—is anathema to energy investors who want to be sure that the money they pour into drilling will deliver returns.
As one executive put it, “Our investors hate uncertainty. This has led to a marked increase in the implied cost of capital of our business.” The executive blamed the “conflicting messages coming from the new administration. There cannot be ‘U.S. energy dominance and $50 per barrel oil’; those two statements are contradictory.”
Even as domestic oil and gas production hit record highs under Biden, fossil fuel CEOs whined endlessly about needing regulatory relief and nicer words from the administration. As they’re finding out, the grass isn’t greener in MAGA-land. Since the very beginning of this country’s oil and gas extraction, Democrats and Republicans alike in government have gone to great pains to keep the sector going through subsidies, bailouts, high-level market coordination, and diplomatic efforts to open up markets for their products. The decades of industrial strategy that have built and sustained the U.S. oil and gas sector are complicated. Despite all its love for the fossil fuel industry, the Trump administration may just not be up for the complex task of keeping it happy.
