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The writer is director of research and co-founder at Energy Aspects
It is now a belief among many in energy markets that president-elect Donald Trump will succeed in driving oil prices down, possibly even further than during Joe Biden’s term.
Brent crude has been languishing in the $70s for the past few months. That is despite members of the Opec+ group agreeing at their last meeting to slow a planned increase in production, removing much of 2025’s expected surplus. It is also despite Trump’s likely hawkish stance on Iran, which will probably lead to a drop in the availability of oil from the country. Although under sanctions, Iranian crude and condensate exports reached as high as 1.8mn barrels a day under Biden compared with 0.4 mb/d under Trump, according to our data.
Team Trump appears to believe unleashing US production could mitigate the impact of rising prices from lost Iranian oil. The problem is that he can’t have both low energy prices and record domestic oil and gas production because US shale producers need higher prices than they did eight years ago to support the investment case for incremental oil growth. But more fundamentally, US production growth is getting gassier. The country’s energy output will continue to grow strongly but it may not have the same impact on oil prices as before.
The administration cannot realistically add anything close to 3 mb/d of additional black oil over the next four years, as Trump’s Treasury nominee Scott Bessent has claimed. This is a resource issue rather than a regulatory problem. There just aren’t enough untapped barrels on hand for this rate of output. We only expect crude production growth over the same period of 0.4 mb/d. That would represent a 3 per cent increase from current levels.
The White House only has a few levers to incentivise faster supply growth. It can allow additional leasing of federal acreage. But the inventory of unleased onshore acreage is limited and offshore leases can require a decade of work before the first barrel is pumped. Reform of the permitting system for new energy projects could theoretically speed up drilling on already leased federal land but may prove challenging to implement even with a Republican-controlled Congress due to legal, environmental and tribal considerations.
Easing the permit process for gas pipelines could allow for greater production in Pennsylvania. And ending the pause introduced by Biden on licences for LNG exports could increase international sales of the gas from the US towards the end of the decade. Subsidies would be politically unpopular, although there are probably some tax changes that could help US producers at the margin. But producers are already signalling limited growth. Chevron, the fastest-growing large producer in the Permian in recent years, has cut planned investment outlays in the area for 2025 and has forecast no acceleration in oil output growth. Instead, growth will slow into the single digits. The bulk of Chevron’s Permian growth next year will come from acreage in New Mexico that yields relatively more gas and natural gas liquids such as propane than oil.
One potential upside to watch could be private equity-backed production. Lower interest rates and the recent signals by Opec+ might encourage the expansion of this. But public companies like Chevron remain under pressure from their investors to constrain spending in favour of shareholder returns.
Consolidation in the Permian is also slowing crude oil development as larger groups buy up smaller ones, adding prospects into the inventories of future projects. And production in secondary shale basins such as Bakken in North Dakota/Montana and Eagle Ford in Texas is expected to decline as producers move more beyond top-tier acreage.
Gas and natural gas liquids will grow much faster as additional LNG export capacity under construction raises prices by increasing demand on the Gulf Coast, incentivising a return to growth in basins in the Appalachian region and around Haynesville in Louisiana/Texas. We also see gas and NGLs growing much faster in the Permian and basins where there is a growing cohort of older shale wells. As they age, such wells tend to produce more gas relative to oil.
We therefore forecast gas production will rise 10bn cubic feet a day over that time period (through 2028), along with 0.6 mb/d of NGL growth. That works out to 2.7 mb/d when converted to oil equivalent output in terms of energy content. In other words, the 3 mb/d talked about by Bessent is realistically 3 mb/d of oil equivalent a day — with the “oil equivalents” doing most of the work.
Jesse Jones, head of upstream at Energy Aspects, contributed to this column
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