President-elect Donald Trump and oil and gas executives have championed each other. But his victory may prove to be a mixed blessing for the industry.
The former president’s return to the White House is likely to usher in more permissive regulations that let companies drill more on federal land and ship more natural gas overseas.
Yet, commodity prices and corporate profits could well fall if Trump pursues policies that send American oil and gas production — the highest in the world — higher still. Trump has urged companies to “drill, baby, drill” and pledged to cut energy bills by at least half, without specifying how he would do so.
Oil executives acknowledge that prospect but say the risk that prices fall during Trump’s second term is worth accepting if he makes it easier for them to sell energy to other countries and finds ways to increase demand for oil and natural gas.
“We’re willing to trade short-term downside for long-term certainty,” said Steve Pruett, CEO of Elevation Resources, an oil and gas producer in Texas, who voted for Trump.
U.S. oil prices fell Wednesday morning before recovering their losses by the end of the day as traders struggled to figure out what effect Trump’s election would ultimately have on the industry. The stock market issued a clearer verdict: An index of domestic oil and gas stocks, including Exxon Mobil and Chevron, climbed more than 5%.
Harold Hamm, executive chair of the shale producer Continental Resources, cheered the election result as “a monumental win for American energy.”
“President-elect Trump has been a steadfast champion of deregulation and unleashing the power of domestic energy production,” said Hamm, a longtime Republican donor who contributed to Trump’s reelection effort.
Oil and gas interests gave around $75 million to Mr. Trump’s presidential campaign, the Republican National Committee and affiliated committees, according to the environmental group Climate Power.
Trump, whose campaign did not respond to a request for comment, is poised to reenter office during a period of uncertainty in the global oil market. After several years of relatively high crude prices and robust profits, companies are staring down the possibility that they may soon be pumping more oil than the world needs.
Oil prices, while well above the level most companies require to make money, have fallen about 10% from a year ago as the United States and other oil-producing countries have opened the taps further. U.S. oil output stood at 13.4 million barrels a day in August, up roughly 20% since Trump left office in January 2021, when prices and demand were still depressed by the pandemic.
The recent oil-price slide has led to narrower corporate profits and lower prices at the pump, which now average about $3.11 a gallon for regular gasoline, according to the motor club AAA.
Natural gas prices are down, too, with producers in gas-rich regions such as West Texas and Pennsylvania running out of ways to transport the fuel to places where there is demand for it.
Although there is little the president can do to fundamentally alter those market dynamics, executives are hoping that Trump can help at least somewhat. The industry hopes he will alter permitting to make it easier to build pipelines and secure permission for new natural-gas export terminals.
President Joe Biden paused approvals for gas export facilities this year, a decision that was deeply unpopular among oil and gas companies. A federal judge ordered the administration to lift the pause.
Building the infrastructure required to send natural gas overseas, where it is likely to fetch higher prices, could help U.S. producers, UBS analysts wrote in a recent note to investors. Of course, that would run counter to Trump’s stated aim of lowering energy prices.
Trump is also widely expected to make it easier to secure leases to drill for oil and gas beneath federal land and water.
“The scale of production growth might depend more on market dynamics and investor appetites, but cost structures could improve,” wrote analysts at ClearView Energy Partners, a research firm based in Washington, referring to how Trump could help the industry.