Oil Executives Talk Permitting But Not Prices in Trump Meeting

On Wednesday, oil and gas executives gathered at the White House to discuss their priorities with President Trump. The meeting, which included members of the executive committee of the American Petroleum Institute (API), focused heavily on permitting and regulation, with oil prices notably absent from the discussion. This strategic focus reflects the industry's growing frustration with regulatory hurdles and the economic impact of tariffs, which have made essential materials like steel pipe more expensive and rattled consumer confidence.

The meeting comes at a critical time for the oil industry. Oil prices have fallen around 14 percent since just before Trump took office, to less than $67 a barrel. This price drop, combined with the administration's tariffs, has created a challenging environment for oil producers. Peter Navarro, a senior White House aide, has even talked about the benefits of oil that sells for just $50 a barrel, a price point that would make drilling new wells unprofitable for many companies.

The industry's priorities, as outlined by API President and CEO Mike Sommers, include increasing leases for oil and gas drilling on federal lands and waters, making pipeline permitting easier, and expediting approvals for new liquified natural gas (LNG) exports. These priorities are aimed at reducing regulatory burdens and accelerating domestic production, which could lead to a surge in job creation and economic growth.

However, the ongoing trade tensions and tariffs with major U.S. trade partners like Canada and Mexico are likely to have significant impacts on the profitability and operational costs of U.S. oil and gas companies. Tariffs on steel and other essential materials have made these items more expensive, directly affecting the operational costs of U.S. oil and gas companies. The increased cost of steel could lead to higher operational expenses and reduced profitability.

The disruption of trade ties with Canada and Mexico, which are major suppliers of oil to U.S. refineries, could also lead to supply chain issues and increased costs. As noted by API, "Energy markets are highly integrated, and free and fair trade across our borders is critical for delivering affordable, reliable energy to U.S. consumers." The tariffs and trade tensions could also rattle consumer confidence, which in turn could affect demand for oil and gas products.

The economic slowdown caused by trade tensions and tariffs could further reduce fuel demand, leading to lower revenues and profitability for oil and gas companies. As noted by Ed Morse, adviser at global commodities trading firm Hartree Partners, "It’s certainly the case that we’ve had a significantly more volatile market than anybody had anticipated and that volatility certainly affected investment decisions."

The meeting also highlighted the industry's concerns about the regulatory environment. The Trump administration's focus on deregulation and increased leases for oil and gas drilling on federal lands and waters has the potential to boost domestic production, create jobs, reduce regulatory burdens, and shift market dynamics. However, it also raises environmental concerns and could impact the U.S.'s international reputation.

In summary, the meeting between President Trump and oil industry executives highlighted the industry's priorities and concerns. While the focus on permitting and regulation is crucial for the industry's growth, the ongoing trade tensions and tariffs pose significant challenges to the profitability and operational costs of U.S. oil and gas companies. The industry's ability to navigate these challenges will be critical for its long-term success.