How much oil can Trump pump?

The last bit of the plan is the most advanced.The Trump administration will open more federal land and offshore blocks to drilling, and approve permits for liquefied natural gas (LNG) projects. Mr Trump wants to create a National Energy Council to cut red tape on everything from issuing permits to distribution. And he eyes a bonfire of President Joe Biden’s green subsidies and rules. The goal? Global “energy dominance", according to Mr Trump.

A petro-boom would advance many of his other aims. More exports would reduce America’s trade deficit. Higher tax takes would bolster its budget. A jump in oil output would allow Uncle Sam to tighten sanctions on Iran while keeping fuel cheap on forecourts. More American gas would also help to meet rising power demand from artificial intelligence, while reinforcing Europe’s economic reliance on its transatlantic partner. The problem is that Mr Trump’s wish to “drill, baby, drill" will run up against the hard realities of the energy market. The president-elect is setting himself up to fail.

Unlike in most petrostates, where state-owned firms dominate drilling, American oil is pumped by private firms, which make their own decisions. They have increased output by so much since 2022, when Europe started shunning Russian barrels, that America is already the largest producer of crude in the world. In October it cranked out a record 13.5m b/d, up from 11.5m when the Ukraine war began. To go further, America’s oilmen need a convincing reason.

They may not get one. America’s shale oil, which accounts for most of its output, used to be pumped by thousands of tiny, trigger-happy firms. A wave of mergers and failures since the late 2010s, when overproduction caused prices to crash, means that the industry is ruled by a few large companies that hate risk. Their shareholders require stable dividends and double-digit returns. Moreover, dearer capital comes on top of rising costs: as production has surged the best wells have been depleted. Shale firms therefore have little incentive to drill more unless oil prices reach $89 a barrel, according to a survey by the Kansas City Federal Reserve. At less than $70 a barrel today, West Texas Intermediate (WTI), America’s oil-price benchmark, is far from that threshold.

The market looks unlikely to move in a helpful direction for Mr Trump. Not only is global oil supply plentiful, but members of the Organisation of the Petroleum Exporting Countries (OPEC) have plenty in reserve. At the same time, demand is weak because of tepid global economic growth and the replacement of petrol-powered cars by electric vehicles. No wonder the Energy Information Administration (EIA), a federal agency, expects America’s oil production to rise by only 0.6m b/d by 2028. On December 5th Chevron, America’s second-largest energy firm, slashed its capital-expenditure forecast for 2025.

Although Mr Trump will probably roll back taxes on energy firms introduced by Mr Biden, such as a levy on methane leakages, doing so will mostly benefit smaller drillers, which are responsible for a disproportionate amount of emissions. Michael Haigh of Société Générale, a bank, reckons that cutting taxes for energy firms might bump up output by 200,000 b/d at most. Subsidising production outright, meanwhile, would be ruinous for the government and cut against another of Mr Bessent’s objectives: bringing down the budget deficit.

The administration plans to speed up permits for new pipelines. That might make wells with limited market access more viable, but it is not clear how many such wells exist. With permitting agencies likely to be staffed by novices, projects could flounder, as happened in Mr Trump’s first term, when officials cut corners, making permits vulnerable to lawsuits. To make more wells viable, Mr Trump could try to boost oil prices by slapping penalties on anyone buying barrels from Iran or Venezuela, and on those helping them. How long that would work is uncertain, however, as other OPEC members would probably raise production to gain market share.

Supersizing gas production looks easier—at least on paper. Since war broke out in Ukraine, America’s pipeline of LNG projects, already long, has lengthened. Rystad Energy, a consultancy, expects the country’s export capacity to hit 22.4bn cubic feet per day in 2030 in the event Mr Trump implements his campaign pledges, up from 11.3bn in 2023—a rise equivalent to 1.9m barrels of oil (mboe) per day in energy terms. What that means in terms of actual output is far from certain. Rystad forecasts it will rise by 2.1 mboe per day by 2028, with some of that consumed at home. Others are less optimistic. Even in its most bullish scenario, the EIA expects production to average just 0.5 mboe per day more that year than in 2024.

For production to truly ramp up, gas prices would have to rise beyond $4.24 per million British thermal units (mbtu), according to producers surveyed by the Kansas City Fed. Yet those producers expect prices to reach just $3.33 per mbtu in two years (up from around $3 today). Although demand for gas, the least dirty fossil fuel, is set to rise, a lot of new production from Australia, Qatar and others is set to hit the market during Mr Trump’s term, which will restrain prices.

All this spells trouble for the ambitions of Messrs Trump and Bessent. “How much the US drills over the next few years will depend much more on decisions made in Vienna [where OPEC meets] than in Washington," says Bob McNally, a former adviser to President George W. Bush. Mr Trump’s policies could even hurt production. His tariffs might make materials such as aluminium and steel pricier for oil firms. Other countries may retaliate by imposing tariffs on America’s energy exports. And trade wars will sap growth everywhere, weakening demand for oil and gas. Mr Trump’s ambition to become the ultimate oil baron may turn out to be a pipe dream.

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