Trump Policies Boost Oil Industry, Despite Price Drops

In the wake of Donald Trump's election victory, several prominent figures in the U.S. oil industry saw their significant political investments yield substantial returns. The new administration swiftly implemented policies that favored the fossil fuel sector, including the opening of federal lands and offshore areas for exploration and drilling, the approval of new liquefied natural gas export terminals, and the rollback of numerous environmental regulations. The Tax Cuts and Jobs Act further bolstered the industry by providing significant tax benefits, thereby solidifying their support for the Trump administration.

The energy sector, which had been a major financial backer of Trump's campaign, witnessed immediate policy shifts that aligned with their interests. The opening of federal lands and offshore areas for drilling and exploration presented new opportunities for resource extraction, while the approval of new liquefied natural gas export terminals facilitated increased exports, potentially boosting profits for energy companies.

The rollback of environmental regulations was another critical policy change that benefited the energy sector. Many of these regulations had been viewed as burdensome and costly for oil and gas companies, and their removal allowed for more efficient and profitable operations. The Tax Cuts and Jobs Act, which included substantial corporate tax cuts, further benefited the energy sector by reducing their tax burden and enhancing profitability.

These policy changes were seen as a direct result of the energy sector's political investments. The industry had spent millions of dollars on political contributions and lobbying efforts, and these investments appeared to have paid off with favorable policy changes. The energy sector's support for Trump's campaign was viewed as a strategic move to ensure that their interests were represented in the new administration, and the subsequent policy changes demonstrated the effectiveness of their approach.

Despite the policy benefits, the financial performance of energy companies did not fully align with these gains. Increased international oil supply and higher costs due to tariffs led to a decline in oil prices, resulting in reduced market values and job cuts. The current oil price of 62 dollars per barrel is below the break-even point for many small and medium-sized enterprises, significantly lower than when Trump took office. However, many executives believe that these short-term challenges are worth enduring.

The White House emphasized that the oil and gas industry is a cornerstone of the U.S. economy, providing millions of high-paying jobs, and that the administration is fulfilling its promise to restore U.S. energy dominance. Environmentalists, however, criticized these measures, arguing that they would increase energy costs, exacerbate climate change, and weaken the U.S. position in the renewable energy sector.

Key figures in the energy sector, such as the executive chairman of an energy transportation company and the former CEO of a major energy firm, were significant fundraisers for Trump's campaign. Their contributions, totaling over 1300 million dollars, helped secure approvals for stalled projects, such as a liquefied natural gas terminal in Louisiana. The Trump administration also eliminated electric vehicle subsidies, providing the traditional energy industry with tens of billions of dollars in tax relief. Companies like ConocoPhillips, EOG Resources, Occidental Petroleum, and Devon Energy are expected to save over 12 billion dollars in taxes by 2025 alone.

The Environmental Protection Agency announced plans to repeal a 2009 climate regulation that recognized greenhouse gases as a threat to public health and provided a legal basis for emissions monitoring. Industry lobbying groups praised this move, while environmental organizations vowed to challenge it in court.

In contrast to the Trump administration, the energy sector faced difficulties during the Biden administration, often feeling sidelined by environmental policies. Now, industry executives frequently meet with the president and influence policy directions. The American Petroleum Institute noted that their pre-election policy proposals were largely implemented by the Trump administration.

On his first day in office, Trump signed an executive order to boost production in Alaska. The Department of Energy also adjusted regulations to facilitate access for companies like ConocoPhillips to the resource-rich Arctic Circle. However, wind and solar energy projects faced stricter approval processes, and related tax incentives were revoked. Clean energy companies expressed concern that these policies would hinder the U.S. from keeping pace with China in the next wave of energy demand driven by artificial intelligence.

While Trump encouraged increased drilling, oil companies prioritized capital discipline. Investors had long pressured shale oil companies to reduce reckless expansion, and many firms now have limited high-quality oil well inventories, making them reluctant to increase investments in a low oil price environment. Trump's desire for oil prices to drop below 40 dollars per barrel to control inflation and support his foreign policy goals was met with caution from executives, who warned that excessively low prices could lead to bankruptcies and reduced production.

Recent data indicates that employment in the U.S. oil and gas extraction sector has reached a two-year low, with companies like Chevron and ConocoPhillips announcing layoffs. The doubling of steel and aluminum tariffs has also increased drilling costs for shale oil companies. Nevertheless, many industry insiders believe that the "policy package" from Trump is sufficient to offset short-term challenges, as reflected in the sentiments of a Texas drilling company CEO who stated, "This is the collective result of our vote."