Trump’s Thirst for Cheap Oil Irks an Industry He Loves to Praise

Donald Trump’s vow to deliver “$2 gas” has collided with a grim reality: his administration’s trade policies are inflicting severe pain on the U.S. oil and gas industry, the very sector he claims to champion. While Trump insists his tariffs and OPEC+ pressure are driving energy dominance, oil prices have plummeted to near $60 per barrel—far below the $65 needed for most shale producers to break even. The result is a paradox: a White House celebrating falling prices even as the industry it lauds faces production cuts, stock collapses, and existential uncertainty.

The Tariff Toll on Profits and Investment
Since April 2025, when Trump imposed a 125% tariff on Chinese goods and a 10% tax on other nations, U.S. crude prices have dropped by over 20%, hitting a low of $55.12 before a brief rebound. The ripple effects are stark:
- Stock Declines: Baker Hughes, Halliburton, and SLB saw shares slump by 20–32% since Trump’s 2025 inauguration.
- Sector Woes: The S&P 500 Energy Sector has fallen over 11%, while the Dow Jones U.S. Oil and Gas Index dropped 15%.
- Investment Cuts: Baker Hughes projects global upstream spending will decline by “high-single digits” in 2025, with North American investment dropping by “low double digits.”

Input Costs Rise as Output Stalls
Tariffs are exacerbating operational costs. Steel tariffs—critical for pipelines and drilling equipment—have backfired. Japan supplies 15% of imported steel pipes for U.S. oil and gas operations, but its seamless stainless steel tubing (used in offshore drilling) faces 25% duties. Meanwhile, retaliatory tariffs from China have halted $17.6 billion in annual U.S. oil and gas exports to China, slashing a key revenue stream.

OPEC+ and the Demand Shock
OPEC+’s decision to boost production has further depressed prices. Goldman Sachs now forecasts WTI could fall to $51 by late 2026, while the U.S. Energy Information Administration cut its 2025 oil demand growth by 400,000 barrels/day. The result:
- Production Risks: U.S. shale output may grow by only 200,000 barrels/day in 2025—far below earlier estimates—as drillers idle rigs.
- Executive Frustration: A Dallas Fed survey found oil executives describing “extreme uncertainty,” with one calling tariffs a “disaster for commodity markets” and another stating, “I’ve never felt more uncertain in 40 years.”

The Contradiction at the Core
Trump’s “energy dominance” agenda hinges on U.S. producers outcompeting global rivals. Yet his policies are undermining that goal:
- Cost Inflation: Steel tariffs and retaliatory measures are raising input costs, while OPEC+’s price war undercuts profitability.
- Political Irony: A Republican administration is hiking industry costs, even as Democrats under Biden had provided $370 billion in clean energy subsidies via the Inflation Reduction Act.

Conclusion: A Recipe for Stagnation
The data paints a clear picture: Trump’s pursuit of cheap oil is sacrificing the very industry he seeks to elevate. With prices at $60—$5 below break-even—and global demand weakening, U.S. shale production faces its first annual decline since 2020. Goldman Sachs warns that low prices may force producers to prioritize shareholder returns over drilling, further slowing output.

The administration’s gamble—that lower prices will eventually spur reindustrialization—ignores the immediate crisis. For investors, the calculus is grim: the energy sector’s valuations are already near multiyear lows, and without policy course correction, capital will flee to more stable markets. As one analyst noted, “This isn’t energy dominance—it’s energy disarray.”

In the end, Trump’s obsession with short-term price declines may come at the cost of long-term U.S. energy leadership—a loss that no amount of “drill, baby, drill” rhetoric can reverse.