President-elect Donald Trump’s incoming energy agenda can be summarized by two strategies: “frack, frack, frack” and “drill, baby, drill.” While railing against the "Green New Scam” on the campaign trail, Trump has promised to tackle inflation by halving energy costs and electricity prices within 18 months of moving into the White House. The jury is still out on whether the incoming administration can achieve this lofty goal.
Inside the Trump Agenda
New data from the Energy Information Administration show the United States is producing a record 13.5 million barrels per day, higher than the pre-crisis daily level of 13.1 million.
Record energy production is occurring despite the current administration’s anti-fossil fuel initiative, which has consisted of blocking drilling on millions of acres in Alaska, increasing royalties that oil and gas lease bond drillers must pay (from $10,000 to $150,000), and imposing stricter environmental regulations on the sector. This past spring, the White House also temporarily paused liquefied natural gas (LNG) export approvals before a federal judge overturned the decision in July.
Trump and some industry experts think the domestic energy sector can accelerate output by reversing President Biden’s energy and environmental policies, rules, and regulations.
After nominating Gov. Doug Burgum to head the Interior Department, Trump assigned him one directive: Open up for drilling. Burgum would oversee one-fifth of the nation's public lands, most of which are in the Western US. An estimated quarter of US crude originates from federal lands and offshore waters managed by the Interior. Trump, Republican allies, and energy representatives say production levels from these regions could dramatically increase.
The president-elect has vowed to end delays in federal drilling permits and leases and to eliminate red tape surrounding stalled oil and natural gas projects. He also wants to "stop the wave of frivolous litigation from environmental extremists that hold up critical energy development projects for years."
With a right-leaning shift in the federal courts, Trump's deregulatory effort may not suffer any roadblocks.
Following the November presidential election, American Petroleum Institute president and CEO Mike Sommers welcomed the decision, saying that energy was on the ballot for millions of voters.
"Voters sent a clear signal that they want choices, not mandates, and an all-of-the-above approach that harnesses our nation’s resources and builds on the successes of his first term," Sommers said in a statement. "We look forward to working with the incoming administration and leaders in both parties to advance bipartisan solutions that unleash American energy as a driver of economic prosperity, environmental progress and stability around the world.”
Whether this could dramatically bolster US energy output remains to be seen. Rob Thummel, a senior portfolio manager at Tortoise Capital, projects domestic LNG exports will double with demand through 2030. Phil Flynn, the energy strategist at The PRICE Futures Group, says boosting output by one or two million barrels per day in the coming years is possible. Standard Chartered believes oil output will not surge under Trump, and production could stay moderate because of changes to the shale industry and incoming tariffs. Goldman Sachs analysts purport that ramping up crude production by three million barrels per day is not entirely unrealistic.
Can Trump Halve Energy Prices?
Crude oil prices have been immensely volatile this year. Since West Texas Intermediate (WTI) crude futures, the US benchmark, reached a 2024 peak of $86 per barrel, prices have been trending downward heading into 2025. While there have been geopolitical-fueled price hikes, intense selloffs have followed them. This has helped gasoline prices fall ahead of the holiday season, averaging slightly above $3 per gallon, according to data from the American Automobile Association. Crude accounts for about half of the overall cost of a gallon of gas.
(Photo by David McNew/Getty Images)
Still, oil and gas prices are higher than when President Biden took office. Could Trump cut motorists’ gas receipts and households’ utility bills in half? Experts say that while the deregulatory push will be a significant factor for the oil and gas sector, price movements will dictate whether to advance output or reduce production.
"While the incoming administration will hold a more favourable view towards the oil and gas industry, ultimately the potential for production growth is going to be largely dictated by price," said Warren Patterson, a commodity strategist at ING, in a Nov. 8 research note.
Break-even estimates vary. Data from the Federal Reserve Bank of Dallas and the Federal Reserve Bank of Kansas suggest that oil prices must hover around $64 per barrel for drilling to be profitable. This might be a challenge in an environment where the supply-demand dynamics are fractured, and international energy organizations publish mixed forecasting reports amid a cooling global economy. However, government demand may offset waning worldwide consumption as Trump has pledged to refill the Strategic Petroleum Reserve (SPR).
The current administration drained the SPR by about 40%, dropping it to a 40-year low of around 346 million barrels in July 2023. The federal government has since been gradually injecting supply into storages, refueling the SPR by approximately 40 million barrels. But this has been a stop-and-start strategy, with Energy Secretary Jennifer Granholm repeatedly tergiversating on auctions.
Trump has vowed to replenish the SPR, which could support prices. At the onset of the coronavirus pandemic, when oil prices collapsed, his administration wanted to purchase millions of barrels of oil. The Democratic leadership resisted him, as Sen. Chuck Schumer (D-NY) described it as a handout to the fossil fuel industry.
A Boon to the Economy
Even prior to Russia’s invasion of Ukraine, which upended international petroleum markets, oil prices were climbing higher. Still, the Eastern European conflict helped lift Brent crude futures, the global benchmark, to as high as $130 a barrel. Gasoline prices also topped $5 a gallon. Conditions have stabilized, but consumers are still feeling the post-pandemic inflationary pinch.
Energy prices are critical not just to drivers at the gasoline pump but also to every aspect of consumers' lives and businesses' operations, says Patrice Onwuka, an economist and the director of the Center for Economic Opportunity at the Independent Women's Forum.
Indeed, energy costs can have a domino effect, from fibers in your clothing to heated homes to keeping business doors open.
"When everything is more expensive because of higher energy costs, then you're going to feel it if you bring down the energy costs," Onwuka said in an interview with Liberty Nation News. "I think people will start to realize, okay, this is how this entire economy really does run on oil."
A 2016 study by the Brookings Institution estimated that lower oil prices can boost real GDP growth by 0.7 percentage points. Bloomberg, speaking to a chorus of analysts and bankers in September, says that below-$70 oil prices can trim inflation rates and bolster consumers’ disposable incomes. This, of course, would finalize soft-landing hopes and encourage the Federal Reserve and other central banks to cut interest rates and return monetary policy to a more neutral stance.
With Scott Bessent, the incoming Treasury Secretary, proposing a 3% annual growth rate as part of his 3-3-3 vision, stimulating the energy industry through deregulation and drilling could help attain this ambitious goal.
Green Boondoggle
Trump and his allies have pledged an all-of-the-above approach to America’s energy market: crude oil, natural gas, nuclear, solar, wind, and anything else that can satisfy the nation’s power demand.
Despite the world spending trillions of dollars on clean energy substitutes, these alternatives have struggled to do their part in feeding families, keeping households warm, and cutting energy costs. Last year, EIA statistics showed that fossil fuels and nuclear accounted for nearly 80% of US power generation. Renewables? A little more than a fifth. Put simply, the taxpayer-supported green energy industry has failed to carry its weight.
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