US President Donald Trump’s promise to boost oil production through his “drill, baby, drill” agenda is facing a harsh reality. The country is already the world’s leading oil producer, but fracking deposits lose profitability when the price per barrel falls below $70. Experts warn that despite Trump’s efforts, the energy sector is not planning an increase in production.
The US has become the world’s top oil power since the war in Ukraine, and its market share of 16.1% is ahead of Russia and Saudi Arabia. However, fracking deposits require high prices to be profitable, and cheaper oil makes it less incentive for companies to produce. The tariffs Trump announced on Canada also work against cheapening crude oil.
According to Francisco Blanch, head of global commodities at Bank of America, “In the US, it’s the price level that determines oil production… The country is already dominant in energy production, and there’s already a surplus in the oil market; it doesn’t need more.” Bank of America forecasts a slight increase in US oil production this year, but it will not be significant.
The industry has shown reluctance to invest in new projects. Beatriz Villafranca, an economist at CaixaBank Research, notes that companies are prioritizing shareholder dividends over investing in efficient drilling processes. Marco Antonio Lara and Alejandro Reyes, economists at BBVA, say that fracking wells start to lose profitability when prices fall below $70 per barrel.
Trump’s “energy emergency” declaration is seen as a way to greenlight exploration and production in federal territories on land and offshore. However, the level of crude oil prices is crucial for the industry’s profitability, particularly for fracking operations. The current price of West Texas crude is above $72.9 per barrel, making it unprofitable for companies to produce more.
The recent stock price decline of large US oil infrastructure companies, such as Schlumberger and Halliburton, also indicates low expectations from the industry. The Federal Reserve of Kansas notes that companies expect a modest increase in drilling activity but not significant increases in production.
Source: https://english.elpais.com/economy-and-business/2025-02-08/trumps-drill-baby-drill-meets-reality-the-us-cannot-extract-much-more-oil-if-the-price-keeps-falling.html