The world’s energy industry leaders meet in Houston next week as plummeting oil prices push Big Oil to slash thousands of jobs even as a pro-fossil fuel U.S. administration encourages them to pump more.
U.S. President Donald Trump’s first 47 days in office have been marked by a rapid overhaul of government and policy, including mass layoffs and the reversal of many of the policies of the previous administration.
He has repeatedly exhorted the industry to “Drill, baby, drill,” and has ordered government agencies to slash red tape to maximise U.S. oil and gas output – already at record levels before he took power. He has ended a pause in new gas export project approvals and overturned a ban on drilling in federal waters.
Trump’s policies on trade and foreign policy have, however, threatened to drive up the cost of millions of barrels of oil that U.S. refiners need from Canada and Mexico. His rapid pivot on foreign policy with Russia could upend global oil flows and reduce the European market for U.S. oil and gas, if the U.S. eases sanctions on Russian energy in the case of a deal to end the war in Ukraine.
His termination of a license that allowed for Venezuelan oil exports to the U.S. and threats to drive Iranian oil exports to zero all portend disruptions to global oil flows.
“It’s a revolution in energy policy that is unfolding… The industry is trying to catch its breath,” said Dan Yergin, the Pulitzer Prize-winning author and vice chairman of conference organizer S&P Global, in an interview.
“I don’t think there’s ever been this amount of upheaval and recalibration happening.”
The energy industry’s reset will be front and center at the CERAWeek conference, where more than 8,000 delegates will meet. Participants and speakers include U.S. Energy Secretary Chris Wright, energy ministers from OPEC+ members Nigeria, Libya, and Kazakhstan, and the CEOs of Saudi Aramco, Chevron, Shell, BP and TotalEnergies.
Crude prices hit a three-year low below $70 a barrel this week after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to go ahead with a planned April output increase.
Even before that, lower oil prices in 2024 and rising costs for equipment and services had squeezed energy companies. Big Oil is under duress, as evidenced by sweeping job cuts and cuts in investment.
Chevron, the No. 2 U.S. oil producer, said it will lay off up to 9,000 employees, while oilfield services firm SLB said they were cutting jobs as part of a restructuring.
Meanwhile, investor Elliott Investment Management built large stakes in oil major BP and U.S. refiner Phillips 66 to push for radical action to transform their performance.
Global oil demand growth has been tepid for the past year, in part because China has so many new electric vehicles on the road that its motor fuel demand has reached a plateau.
Refining profit margins have fallen, weighing heavily on oil company results in 2024 and are expected to do so again in 2025.
U.S. crude exports could decline this year as retaliatory Chinese tariffs bite.
“It’s not A plus B equals C anymore. There are like nine equations here. There are so many things going on at once that you pull on a string, you don’t know where the other end of the string is going to be,” said Dan Pickering, chief investment officer at Pickering Energy Partners.
Liquefied natural gas (LNG) has been a bright spot in recent months. The United States is already the world’s largest LNG exporter, and producers have plans for a massive expansion. Trump’s reversal of former President Joe Biden’s halt on new projects means producers are likely to start approving those expansions soon.
Wright and Interior Secretary Doug Burgum toured Venture Global’s Plaquemines LNG export facility in Louisiana on Thursday, touting American energy and natural gas. The company is set to expand the plant’s production capacity with an additional investment of $18 billion.
CAUTIOUS PRODUCERS
Global benchmark Brent futures are expected to average $74.50 a barrel this year and just $66.46 a barrel next year, according to the U.S. Energy Information Administration (EIA), down from over $80 a barrel last year.
In a lower price environment, there is little sign that oil investment and output is going to grow. Oil companies are focused on capital discipline, improving productivity and shareholder returns, rather than drilling more.
“The costs are way higher and that affects the profitability,” said Josh Young, chief investment officer at Bison Interests.
“You’re starting to see producers hold back their capital. It’s the opposite of what the president wants.”
Rising costs in aging shale fields are also a challenge. U.S. oil output is set to grow 380,000 barrels per day this year, much less than the million-bpd growth in some recent years.
Producers, on average, are expected to grow 2025 output by 1% with capital expenditure set to fall 4%, according to Morgan Stanley’s research.
“Shareholders are saying capital discipline, return cash to shareholders and then you have the most powerful man in the world, saying, drill, baby, drill – I think you pay lip service to the president, and you follow the wishes of the shareholder,” Pickering said.
(Reporting by Arathy Somasekhar in Houston, Editing by Liz Hampton, Simon Webb and Marguerita Choy)
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