“Drill, baby, drill” became a frequent refrain during the 2024 presidential campaign. Despite the largely successful appeal to oil producers, several recent trends have begun to undermine the people doing the drilling.
The promise of a grand resurgence for oil was suspect even before counting the ballots. U.S. production was already enjoying a boom that began during the first decade of the 21st century. From 2007 to 2024, domestic oil production rose an astounding 156%.
Given the data, it’s difficult to justify the allegation that oil producers have been victimized by overbearing government constraints under recent Republican or Democratic presidents.
In fact, U.S. policies are highly conducive to oil extraction. Unlike most countries, private landowners, not the government, own the mineral rights on nonfederal lands. This legal framework gives industry easier access to desirable sites.
Despite occasional skirmishes, an extensive grid of pipelines, railroad tracks, and highways facilitates the transport of energy resources. In addition, the government provides valuable technical assistance to companies trying to find and produce more oil at less cost.
So, at its core, “drill, baby drill” was mostly about reducing the environmental regulations that apply to most businesses with significant pollution as a side effect – regulations that protect the overall quality of life in America.
Another red flag during 2024’s oil boosterism was the promise to lower prices while increasing production. As energy analysts noted, production generally rises when prices are high because of the incentive to drill more. Production recedes when prices are low because of reduced profitability.
Three months into the Trump administration, the signs of trouble for the oil industry are on the rise.
For starters, the rules of the game have been in flux since Inauguration Day. The arrival of a new administration in Washington often alters how businesses operate. However, previous modifications typically resulted from legislation passed by Congress or careful executive rule-making. In either case, the process was deliberative, various sides weighed in with their arguments, and the final results often involved some compromise. Existing contracts didn’t suddenly become null and void.
Policy changes by the current administration have been abrupt and sometimes contradictory. Text messages citing unspecified “administration priorities” and presidential decisions made “instinctively” now replace formal decision-making. This new, at times, amateurish approach threatens the legal doctrine of due process. All things being equal, policy uncertainty leads to less spending to develop oil and other resources.
Secondly, the new administration is disrupting intricate supply chains, especially those that cross national borders. If oil producers buy steel from abroad or swap oil across borders to match crude oil with the right refineries, for instance, they do so to cut expenses. Shattering these relationships will increase industry costs and, ultimately, the price consumers pay at the pump.
Oil companies should also worry about other effects of the administration’s tariff policies. The Federal Reserve chair now expects higher inflation and a weaker economy – a view most economists share.
The likely impact of the economy on oil is not difficult to discern. The first question an oil forecaster asks is, “What are the projections for economic growth?” A slowing or drop in the overall economy is generally associated with a decline in oil demand and, hence, a drop in production.
Moreover, steep U.S. tariffs may encourage other countries to retaliate against products where America has a trade surplus, such as agriculture and energy. It is difficult to see how U.S. oil production can rise or even maintain current levels if it confronts higher barriers abroad.
Companies should also beware of efforts by the President to force the energy sector to play a disproportionate role in fighting inflation. It is possible to welcome efforts to reduce prices at the pump while recognizing that this will likely lead to lower U.S. oil production.
Still, it was jarring to see the President in February welcome an increase in the production of Middle Eastern oil powers, given its likely adverse effects on U.S. production. The appeal to the Persian Gulf was unlike previous U.S. efforts to rein in particularly high prices; it was, instead, an attempt to push moderate prices down to the point they would threaten domestic investments.
The oil industry may also want to reconsider its association with the Trump administration’s strident anti-environmental positions. The President is attempting to overturn virtually all recent controls on pollution, including greenhouse gases. As the disruptions in human civilization from a warming planet become more evident, Trump is purging government websites of suspect words like clean energy, climate science, environmental quality, and pollution.
Meanwhile, the President touts “beautiful, clean coal,” although it is the dirtiest of the fossil fuels and is no longer an economical choice for electric generation. Does the oil industry want to align itself with the view that we should use coal oblivious to its effects on human health and climate or that pollution no longer matters?
The Trump administration’s attack on limiting U.S. methane leakage by the oil industry presents a significant fork in the road. Fossil fuels and agriculture dominate the emissions of this greenhouse gas. Dealing with methane has a substantial impact on how fast the earth warms. In the energy sector, vigorously addressing this problem is a relatively easy way to slow climate change; leakage can be sharply reduced at reasonable cost.
The impacts of reining in methane emissions should be substantial enough to go well beyond greenwashing, but the effort can’t rely on voluntary action alone. Fighting government regulation or taxation of methane or tools that measure emissions more accurately will damage the brand of U.S. oil at home and abroad.
The current debates about energy and the environment resemble similar discussions after the 1980 election of Ronald Reagan and the appointment of James Watt as Secretary of the Interior. The administration’s boosterism for unfettered domestic oil production backfired amid a global drop in oil demand and a backlash that galvanized environmental advocates. Coastal states with oil potential banded together to convince Congress to further restrict drilling in most federal waters.
It is difficult to discern how the current battle over environmental regulation of U.S. oil production will turn out. It is clear, nonetheless, that the Trump administration’s hostility to environmental protection raises the stakes of the debate and could subject the industry to a substantial backlash down the road.
Jay Hakes has worked at the U.S. Departments of Interior and Energy, helped write the National Commission on the BP Oil Spill report, and authored three books on U.S. energy and environmental history.
