In just a few days, President-elect Trump will return to office, determined to fulfill his many campaign promises, including his high-profile commitment to ease the regulatory burden on oil and gas producers so they can “drill, baby, drill.” Significantly ramping up production would likely bring down consumer prices for gasoline, diesel and other fuels — a noble goal — but it would also be at odds with the conservative, financially disciplined strategies that now guide many oil majors and oil-focused E&Ps. With the prospects for “drill, baby, drill” uncertain at best, and the correlations between oil prices, rig counts and production volumes less reliable than they used to be, how can we develop a production forecast? In today’s RBN blog, we explain what we do — oh, and we share our forecast with you, for free!
We released RBN’s Top 10 Prognostications for 2025 a couple of weeks ago, and #1 on our list was “Chill, Baby, Chill – Trump’s 2025 Energy Goals Face New Industry Realities.” We pointed out that while the incoming president promised to get oil-patch workers “pumping, fracking, drilling and producing like never before,” delivering on such ambitions is far easier said than done. Unlike President Trump’s first term, when he oversaw a 3-MMb/d increase in oil production (before COVID erased a third of that growth), the mid-to-late 2020s present a markedly different landscape. The era of wildcatters and private companies driving rapid production growth has given way to dominance by far more disciplined, financially conservative oil majors.
These large players are motivated to maintain financial discipline, prioritizing shareholder returns over aggressive production expansion that, if pursued by many or most E&Ps, would lead to a glut of supply, lowering prices and hurting bottom lines. We concluded, “There will be a lot of talk, but for 2025, we are going to stick with our production outlook for a relatively modest 3%, 400-Mb/d increase in crude oil production, and a 2%, 1.9-Bcf/d increase in dry gas production. It’s growth, but nothing crazy. We are rooting for you, President Trump, but the world out there has changed and it’s hard to imagine it changing back.”
What’s changed exactly? A lot of things. For one, there’s been a slew of upstream M&A activity the past couple of years — enough to fill two Drill Down reports (click here for the first and here for the second, which was posted last month.) As a result, the average U.S. producer is considerably larger now than it was back in 2020, and therefore more able and willing to take a big-picture “portfolio” approach to its drilling plans — i.e., rather than respond to mercurial market fluctuations, they operate under long-term plans that take into account wider supply-demand balance dynamics.
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