US shale executives levelled some of their sharpest criticism to date against President Donald Trump, complaining that his "energy dominance" agenda is falling short when it comes to rallying around domestic oil and gas producers.
In a closely watched survey by the Federal Reserve Bank of Dallas last week, executives directed their growing ire — in anonymous remarks — at Trump's unrelenting push for cheaper fuel costs, as well as his trade wars, that have combined to send oil prices tumbling to shale breakeven levels. Their increasing frustration suggests firms are beginning to lose faith in a president who has notched up notable policy wins on the deregulation front for the industry, but whose tariffs on steel and aluminum imports have raised oil field service costs.
"The US shale business is broken," wrote one respondent from an upstream firm. "What was once the world's most dynamic energy engine has been gutted by political hostility and economic ignorance." Whereas the previous administration of president Joe Biden sought to bury the sector in red tape, Trump's White House shows little understanding of shale economics, the executive argued.
The survey found that oil and gas activity declined slightly in the third quarter. "This was another lacklustre quarter for the upstream… industry," Dallas Fed senior business economist Kunal Patel says, based on survey responses. "Activity and oil production fell slightly, while many costs continued to increase. Most respondents said they had delayed investment decisions owing to heightened uncertainty, 42pc claiming slight delays and 36pc significant ones. "The uncertainty from the administration's policies has put a damper on all investment in the oil patch," wrote one participant. "Those who can are running for the exits."
The shale sector had already been showing signs of slowing as technology gains begin to bump up against their limits at current oil prices. US crude output is tipped to fall next year for the first time since the pandemic as companies curtail activity. "We have begun the twilight of shale," wrote another survey participant. "The US isn't running out of oil, but she sure is running out of $60/bl oil."
Pressure points
And with forecasts for crude prices to fall further ahead of a looming global oversupply, spurred in part by supply hikes from the Opec+ producer group, little respite is seen. Survey respondents now expect the US crude benchmark will end the year at $63/bl, down from the $68/bl forecast in July. "The downward pressure on oil prices coupled with continued tightness in finding qualified labour in remote locations continues to pressure profitability and dividends," one said.
With US shale's best days behind it, upstream independents such as Continental Resources and EOG Resources have started to look abroad for growth. As such, 77pc of executives quizzed said they expected shale oil drilling to become commercially viable outside the US, Canada and Argentina over the next decade.
Despite a growing tide of US industry layoff announcements — the most recent being ConocoPhillips, which plans to cut its workforce by as much as 25pc — the bank's employment index for the sector remained steady. But the wider survey, which included responses from 139 firms across Texas, northern Louisiana and southern New Mexico, suggested growing pessimism in the industry.
While 57pc of executives estimate that the administration's regulatory changes since January have reduced breakeven costs on new wells by less than $1/bl, a further 25pc see reductions of $1-1.99/bl. But service sector companies risk getting squeezed by higher costs that may make it difficult to meet future demand. "A vibrant oil field services sector is critical if and when the US needs to ramp up production," one survey respondent said. "Right now we are bleeding."
