Incentives not favored by oil companies
The Trump administration’s pledge to sweep regulations on the oil and gas industry may not be enough to help American shale oil companies bolster their drilling activities.
More drilling could actually damage the profits of companies, particularly at the global oil prices of flux. Darren Woods, CEO of Exxonmobile, said, “We expect that if gross prices drop, we will see industry revenues fall and profits fall.”
White House advisers know this and they don’t expect a big boost to domestic production, the Wall Street Journal reported.
Trump’s goal of widening US oil drilling conflicts clashes with the reality facing the energy giant. Energy giants are focusing more on managing oil gluttony into global markets where prices have fallen.
The Kansas City Federal Reserve claims that US oil producers are reporting that they need to raise oil prices to $84 per barrel, 15% more than current prices, to expand their drilling .
OPEC’s help
If President Trump wants to lower energy prices, his advisor said he will need help from the Saudi Arabia-led OPEC. Trump has already urged the group to increase supply, but Saudi officials have revealed that they are not prepared to boost production, according to reports. It depends on the profits of oil. According to Business Insider, OPEC has delayed supply increases three times despite agreements to facilitate production cuts.
At a recent meeting, OPEC+ confirmed its plans to increase output from April, continuing to restock the rest of the quarter. The cartel will gradually roll back the production curbs, reporting to bring 2.1 million barrels online by the second half of 2026.
Some experts believe this could lead to a price war between Trump and Saudi Arabia, putting more pressure on the global market.
FAQ
What is OPEC?
OPEC, or the organisation of oil exporters, is a group of oil producers who work together to manage the supply and prices of oil in global markets. The group includes countries such as Saudi Arabia, Iraq and Venezuela.
Why are US shale producers not increasing oil production?
US shale companies have already pumped record amounts of oil, and further increase production could potentially damage profits due to current supply overload and falling.
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