Why Big Oil is resisting Trump’s call to ‘drill, baby, drill'
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Recently, the United States has been far outpacing the rest of the world when it comes to producing one very important commodity. So every single day, the U.S. pumps more than 13 million barrels a day of oil. 13 million barrels of oil.

That's filling up 800 Olympic-sized swimming pools every day since 2023. That is the most the U.S. has produced in its history and the most that any country has ever produced. The U.S. is in first place for oil production, ahead of Saudi Arabia, China, Russia. But for a while now, President Donald Trump has been saying that that isn't enough.

He said it on the campaign trail. And we got to turn this country around and we're going to turn it around fast. And we're going to drill, baby, drill. He said it at the Republican National Convention. We will drill, baby, drill. And in his inauguration speech last month. That is why today I will also declare a national energy emergency. We will drill, baby, drill. Yeah!

But as much as Trump wants to crank up oil production, there's, well, just one problem. One of the ironic things about the oil industry's close relationship with Trump is that he's asking them to drill, baby, drill. But actually, the oil industry does not want to do that. I'm Michaela Tendera from the Financial Times.

Today on Behind the Money, why Donald Trump's calls for ramping up domestic oil production aren't lining up with the reality of the current market. I'm here with the FT's U.S. energy team. That's editor Jamie Smith and reporter Amanda Chu. Hey, guys. Welcome to the show. Hi, Michaela. Thanks very much for having us. So, behind the money.

As we've established, the U.S. has a lot of oil right now. So how did we get here? You know, thinking back roughly 15 years ago, wasn't everyone worried that we were going to run out of oil? Well, it's all thanks to the shale revolution. So around 2010, we suddenly advanced in drilling technology and we were able to tap into these industries.

shale formations that we couldn't before. And that really unleashed a lot of oil and gas production and completely transformed the U.S. into the largest producer in the world right now. Right. So we've talked about the shale revolution on this show before, but let's do a quick refresher.

What is shale exactly? Yeah, it's a type of sedimentary rock which holds oil and gas within it. And the amazing thing about the shale revolution was fracking was invented and it was a technology that was able to split open the rock and extract the oil and gas. It just opened up huge extra reservoirs of gas. Across the U.S., from Texas to North Dakota to Pennsylvania—

oil companies started using this unique technology to unlock shale oil. Now fracking, no surprise, is expensive. But funding wasn't a problem when it came to shale.

This way of accessing oil was super popular on Wall Street. I think investors at the time were really willing to jump on board what was seen as a technological revolution. So hundreds of billions of dollars were raised, you know, from capital markets, IPOs. You got private equity getting involved. All different types of investors were rushing into the sector.

And as a result, oil companies unlocked troves of liquid gold. That's been a key reason that the U.S. is in this number one spot in the global oil market today. So now we're at the point where essentially we're in this oil glut. So I asked Jamie, why does Trump want more drilling? During the campaign, Trump set out that he was going to slash energy prices in half if he was elected to office.

So I think one thing he's tapped into is the fact that inflation has really, you know, taken off in the US over recent years. It's become a huge issue. And one way to bring prices down across the economy is to reduce energy prices.

You're thinking of transportation. You're thinking of heating. You're thinking of all these different parts, electricity and the economy. So if you can tackle the oil price, you get it down, well, then he thinks he can control inflation. Traditionally, Trump's been a champion of the oil and gas industry, and they've rallied behind him.

Here's the CEO of the American Petroleum Institute talking about the U.S. election at a recent press briefing that Amanda attended. But now that Trump's actually returned to the presidency,

things seem different. Okay, and so how have oil companies been responding to this messaging from Trump, especially now that he is in office? What are they saying and doing? I mean, oil and gas companies are not following his marching orders when it comes to drill, baby drill. And so what we see is that

Many of the large oil and gas producers, they're keeping capital spending, which is spending on drilling. They're keeping that either steady or they're actually lowering their spending for this year. Chevron at the end of last year announced that they were lowering their capital spending for 2025. And so this is the second largest oil and gas producer in the U.S.,

And we also have Occidental Petroleum. They anticipate activity to remain steady. We have ConocoPhillips. I think they're planning to reduce spending by around $500 million. So a lot of the largest players here are not planning on ramping up activity.

Right. So that is completely at odds with what Trump is saying he wants from these companies. So why are oil companies against doing this right now? Why are they cutting spending and why are they against continuing to drill right now? Well, it's because, you know, oil and gas companies, they respond to their investor interests.

And, you know, we're in an oil glut right now, as you mentioned, and that's not really good for company profits. For the past couple years, oil and gas investors have been really pushing for companies to keep

spending flat and reward them with, you know, dividends and shared buybacks. And so it's not in the interest of Wall Street for these companies to all of a sudden spend a bunch of money to expand drilling and to get a lot of oil for the price to be very low. And so oil and gas companies and Trump have different interests in mind. ♪

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That's 1-800-Flowers.com slash ACAST. So I want to talk a little bit more about how Trump and the oil companies are actually at odds here. Trump wants oil to be cheaper. He says that that's going to bring down the cost of everyday goods. But oil companies actually want the price to go up. That's what would make it worth it for them to drill more. Right now, the U.S. oil price, it's in the low $70 a barrel range.

It's about $10 below the price of what producers say it needs to be for them to substantially boost drilling. And investors are eager for returns. They've been burned before. The shale industry has gone through two crises.

massive booms and busts over the last 15 years in the US. One of them was back in 2014, when we'd had a commodity super cycle driven by China, huge demand for oil and other minerals, and that came crashing to a halt as the Chinese economy stuttered. So that was the start of one big slowdown. And then we had the COVID pandemic where oil collapsed to minus prices.

And that brought a shuddering halt to the whole industry. It really cost, you know, thousands of jobs were lost. It was huge pain across the sector. And that's really colored investors' thinking and how they put dollars into the industry. Now, investors are right to be a little nervous. Global demand for oil is also weakening. And the reason is similar to 2014. At this particular moment, the Chinese economy, which has been driving oil,

oil demand over the last couple of decades is tapering off.

You know, we've got a weak economy in China. You've also got an energy transition in China where there's a huge take up in electric vehicles, which is denting demand for gasoline in that country. And you've got quite a lot of supply, you know, held in reserve. OPEC Plus has something like six million barrels waiting to put back on the market. So we've got too much supply.

We've got weakening demand. So in this case, investors are saying there's no way we're going to put loads more money into the sector because that will just cost us a lot of money. So oil companies have basically said that drilling more right now isn't going to happen.

So, Amanda, how is Trump trying to change their minds? So on his first day in office, he signed a couple of the executive orders declaring a national energy emergency. You know, even though production's at record highs, he said he would call on agencies to consider the removal of electric vehicle subsidies and favorable regulations for that industry that would, you know, impact oil demand. He's also lifted sanctions

the Biden ban on offshore drilling leases. So he's lifted a lot of the red tape. But, you know, as we see from companies' earnings calls and from analysts, it's not the red tape that's impacting short-term oil production. It's the price of oil and investors. And so Trump can ease policies, but they're not going to drill more.

So is there anything then that could change oil executives' minds that would spark more drilling? What factors might come into play for companies to want to drill more?

Demand is the key and the oil price is the key. So what we got to look for are things happening probably overseas. For example, the Middle East. If you had, as we have over the last year seen, there's been tensions in the Middle East, if there was a risk of a conflict there.

That could push up prices into that level of somewhere between $80 and $100. That's the sort of target area where you might see shield producers saying there's money to be made. Let's rush into the market. So we're really looking to see events overseas.

Amanda, what do you think? I mean, I think if we ever see a pivot away from this current, you know, we're not going to drill baby drill strategy. Like we're going to need a really long term structural change in oil consumption. And it just doesn't seem like we're heading down that path. I mean, even if there is like

a black swan scenario in the Middle East that triggers a spike in oil prices. We would really need something that would change oil market prices for the long term for drillers to change their strategy. And so it seems very unlikely that, you know, we're going to see a change, of course, in the next four years. Now, we've been discussing President Trump's various wishes for things that he wants to have happen during his administration.

One of the biggest and most recent examples of that are the tariffs he said that he'd like to put on Mexico and Canada. What does the oil industry think of these? The oil industry, and in particular the multinational companies within the oil industry, are very concerned about tariffs because they work in a global industry. They're selling their product to countries like China, Europe, and these are countries which are really in the crosshairs of Trump and his tariff plans.

Now, at the time of this recording, we're in a bit of a holding pattern with the tariffs on Mexico and Canada.

But if these do come into effect, what impact would that have on the oil market? Yeah, so we've seen basically whenever you get uncertainty and this sort of talk about whether we're going to get tariffs against Canada, Mexico, and we have actually got tariffs on China. So what that does is it brews uncertainty and that would push up the price of oil temporarily. But if tariffs get imposed and it hits global growth...

then over the longer term, you could see the oil price falling and this glut increasing. It could cause a lot of economic damage and that could push demand for oil down. And it will make producers even more nervous about investing further and drilling more to create more product. Where do you guys see the relationship between big oil companies and Trump going over the next four years? Will they turn on him?

I think the question could be more, will Trump turn on them? I think that could be the issue. If they don't deliver an increase in production, which brings down the price of oil and gas, then I think Trump...

tends to switch his positions rather quickly and he could well turn his fire on the big energy companies. And I think any company is quite wary of President Trump. And I think one of the reasons is it's because of his personality and his willingness to attack people who are seen as critics. So

That nervousness means that people are very willing to talk off the record and they'll give you a good view of their real and valid concerns, particularly about issues like tariffs. But they're not prepared to go on the record and speak out about that. So in the end, how should we think about these executive orders that Trump's been signing? I assume there's got to still be, you know, some good news in them for the oil industry, right? Yeah.

I think this blizzard of executive orders, they're not going to have a short-term impact on the US market. What they might do is they probably help oil producers over the medium to longer term because it really sends a signal that you're going to be able to

drill in the Gulf of Mexico or in other parts of the country, you're going to be able to obtain these leases, which you will then be able to use in four, five, six years, as long as there's demand there. But another point to think about is that oil companies are

consider their policies over the longer term. They invest over decades, whereas politics is very much a four-year cycle here in the US. So the companies are concerned that if there's a wholesale changeover in environmental policies during this Trump presidency, that

when his presidency comes to an end, we'll get potentially a Democrat administration which will overturn all those policies again and they'll have to race to catch up. What multinational companies in particular want is they want stability in policy. They want to know that they can invest their money now and in 10 years' time they can get a return. And that's something that they're going to find very difficult under President Trump.

Jamie, Amanda, thanks for coming on the show. Thank you. Thank you. Behind the Money is hosted by me, Michaela Tendera. It's produced by me, Safiya Ahmed, and Katya Kamkova. Sound design and mixing by Sam Giovinko. Topher Forges is our executive producer. Cheryl Brumley is the global head of audio. Original music is by Hannes Brown. Thanks for listening. See you next week.

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