Trump tariffs and falling oil prices threaten end of US shale boom

Trump tariffs and falling oil prices threaten end of US shale boom

The US shale oil boom that transformed the country into the world’s top energy producer is showing signs of faltering, as falling crude prices and rising costs from Donald Trump’s tariffs push oil companies to slash spending and idle rigs. Executives across the sector are warning that the decade-long surge in domestic production could now be nearing its end, the Financial Times reported.

S&P Global Commodity Insights forecasts a 1.1% drop in US oil output in 2025 — the first non-pandemic-related annual decline in over ten years. Oil settled at $61.53 a barrel on Friday, far below the $65 breakeven level needed by many shale producers. Trump-era tariffs on steel and aluminium have added to the burden, driving up the cost of casing, one of the biggest expenses in well construction.

Tariffs and Opec+ decisions create perfect storm

The industry’s slowdown comes amid growing anxiety over the global oil supply. The Opec+ decision to increase production has reignited fears of a price war, leading to further downward pressure on crude prices. Analysts say the combination of weak demand, oversupply fears, and tariff-induced cost increases is squeezing profits across the US oil patch.

Clay Gaspar, CEO of Devon Energy, told investors the company was on “high alert,” while Occidental Petroleum and Diamondback Energy have already cut back their active rig counts. SM Energy’s Herbert Vogel called the current strategy simply to “hang in there.”

The number of onshore rigs, a critical measure of drilling activity, dropped to 553 last week, down 26 from the same time last year, according to Baker Hughes. Analysts at Enverus estimate the top 20 US shale producers (excluding Chevron and ExxonMobil) have cut $1.8 billion — about 3% — from their 2025 capital expenditure budgets.

Oil dominance promise under pressure

President Trump has pledged to unleash American energy to secure “energy dominance,” but production — which peaked under Joe Biden — could continue to fall if prices slide further. Former Pioneer Natural Resources CEO Scott Sheffield warned that if crude hits $50 a barrel, US output could drop by up to 300,000 barrels a day, wiping out production equivalent to smaller Opec nations.

Adding to the challenge, Saudi Arabia has ramped up production in an apparent bid to reclaim global market share, a move that Sheffield said could succeed over the next five years.

Despite rising costs, companies are reluctant to cut dividends, which remain a key focus for shareholders. “Dividends are sacrosanct in this environment,” said Jim Rogers of Petrie Partners, emphasizing that maintaining free cash flow to satisfy investors has become the industry’s priority, even if it means pulling back on growth.

Layoffs and uncertainty cloud oil sector outlook

While global energy giants like Chevron and BP have announced 15,000 job cuts combined, employment in the US oil sector has remained relatively stable for now. But with Trump’s trade policies continuing to raise operational costs and no immediate recovery in crude prices on the horizon, more companies are expected to scale back drilling.

“In this environment, we drop the rigs and buy back stock,” said Travis Stice of Diamondback Energy. “Every single conversation I’ve had is that this oil price won’t work.”