[Text/Observer Network Zhang Jingjuan] US President Trump is undoubtedly a supporter of fossil fuels, but under the pressure of tariff policies and falling crude oil prices, American oil producers are adjusting their strategies, cutting costs, and idling drilling platforms. According to a report by the Financial Times on the 25th, oil company executives warned that the decade-long shale oil boom in the United States is about to end.

The report stated that OPEC+'s unexpected decision to increase oil production has exacerbated the downturn in the U.S. oil industry, raising concerns about a new round of price wars and prompting analysts to lower production forecasts.

Clay Gaspar, CEO of Devon Energy in Oklahoma, told investors this month: "We are currently in a state of high alert. As we enter a more difficult environment, all options are on the table."

Data from S&P Global Commodity Insights shows that next year, U.S. oil production will decline by 1.1% to 13.3 million barrels per day.

The Financial Times said that this will be the first annual decline in a decade, excluding the special situation during the pandemic in 2020 when demand collapsed, causing oil prices to plummet and triggering large-scale bankruptcies of companies in regions such as Texas and North Dakota.

On May 23rd, U.S. crude oil prices fell again, closing at $61.53 per barrel, down about 23% from the annual high.

"The slogan now is 'hang in there'." Herbert Vogel, CEO of SM Energy, said at a meeting.

It was reported that the decline in production would mark the end of the glory days of the U.S. energy industry. The shale revolution had driven economic growth, boosted GDP and employment markets with cheap oil and gas, and improved the trade balance through a surge in exports.

The surge in shale oil production also broke America's dependence on Saudi Arabia and other OPEC members, allowing the White House to impose sanctions on oil-producing countries such as Iran, Russia, and Venezuela.

During his campaign last year, Trump repeatedly promoted the slogan "drill, baby, drill," outlining an energy policy that favored oil and natural gas, as well as promises to relax regulations and expedite permits.

In order to maximize the output of traditional energy sources such as oil and natural gas in the United States, Trump announced a series of executive orders on his first day in office, including declaring a national energy emergency, revoking environmental protection measures, and withdrawing from the Paris Agreement. He also promised to ensure U.S. "energy dominance" by "releasing" more drilling and capacity.

However, it seems that the prospects for U.S. oil companies are not optimistic. The report pointed out that if oil prices continue to fall, the record-breaking production during his predecessor Biden's term may further decline.

Local time January 20th, U.S. President Trump signed an executive order. New York Times

Scott Sheffield, former CEO of Pioneer Natural Resources, an American oil and gas exploration and production company, told the Financial Times that if crude oil prices fall below $50 per barrel, U.S. daily production may decrease by up to 300,000 barrels, exceeding the total production of some OPEC member countries.

He believed that Saudi Arabia's recent decision to increase production directly threatened the global market share of U.S. producers. "Saudi Arabia is trying to regain market share and may achieve this goal within the next five years."

Baker Hughes, an American oilfield services company, reported that the number of U.S. land-based oil drilling rigs, a barometer of drilling activity, decreased by 10 units compared to the previous week, reaching 553 units as of May 23rd, a decrease of 26 units from the same period last year.

The report stated that some major producers have already started layoffs. According to data from the U.S. Bureau of Labor Statistics, Chevron and BP have announced global layoffs of 15,000 people, but so far, employment numbers in this industry in the United States remain relatively stable this year.

Energy research group Enverus said that excluding ExxonMobil and Chevron, the capital expenditure budgets of the top 20 U.S. shale oil producers have been cut by approximately $180 million, a decrease of 3%.

Vicki Hollub, CEO of Occidental Petroleum, said: "As operators, we cannot control macroeconomic conditions, but we can decide how to respond." The company reduced its drilling platform count by two in the first quarter.

It was reported that if oil prices fall to $50 per barrel, many companies will reduce the number of drilling platforms. One influencing factor is that the Trump administration previously stated that if oil prices fall to this level, it would help curb inflation.

Travis Stice, chairman and CEO of Diamondback Energy, said: "In the current environment, we will reduce drilling platforms and repurchase stocks. All discussions point to the unsustainability of the current oil price." The company recently warned investors that U.S. oil production may have peaked.

Pumping unit in the Inglewood Oil Field in Los Angeles, California, USA. IC Photo

The Financial Times said that Trump's other policies have also impacted the industry. Tariffs have driven up the prices of key materials such as steel and aluminum in the oil industry. The price of casing (the largest cost item in drilling) increased by 10% in the first quarter alone.

"Economic viability will be challenged. We will see more capital withdrawals in the coming quarters." Doug Lawler, CEO of Continental Resources, said.

Companies will be forced to tighten their spending further, protecting free cash flow to pay dividends and repay debts in order to appease Wall Street investors.

Jim Rogers, partner of Houston boutique investment firm Petrie Partners, said: "Dividends must be prioritized. In the current environment, they are sacred and untouchable."

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Original article: https://www.toutiao.com/article/7508598480378528294/

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