Much of the commentary in the political press since Donald Trump won the election on November 5 has touted the supposed flood of U.S. crude oil production, which his new industry-friendly policies will unleash. Gasoline will be cheaper. The Saudis, Iranians, and Russians will go broke. U.S. energy dominance will reign supreme. Even a highbrow Washington-insider news outlet like Semafor ran headlines like “Trump Wins, Oil Slumps” and “Gulf Governments may prefer Trump, but they can’t afford him.”

The truth is a lot more mundane, however, and we are more likely to see a plateau in U.S. production rather than a surge in 2025 for reasons having nothing to do with American politics.

It is true that the Biden administration did some things that were not welcomed by the oil industry. Biden raised the royalty costs for drilling on public lands and sharply curtailed the amount of new acreage awarded by as much as 95 percent. The outgoing administration has also almost halted the award of new offshore acreage in the Gulf of Mexico and has made regulatory changes that put the smaller companies that dominate shallow-water offshore production at a disadvantage.

However, these policy changes have only slightly slowed the juggernaut that is the U.S. oil industry. The bulk of onshore shale output originated on privately owned land with privately held mineral rights, so public land availability is a marginal issue. There are also vast offshore leases in the Gulf of Mexico that are still being explored. U.S. crude oil production (including condensate) averaged 12.9 million bpd in 2023, exceeding the previous peak of 12.3 million bpd prior to the 2020 pandemic, which cratered global demand and caused a deep slump in drilling activity worldwide. In the most recent month for which final data is available, U.S. crude oil averaged 13.4 million bpd in August 2024. It probably pulled back slightly in September and October due to the hurricanes, a common seasonal phenomenon.

The primary driver of the growth (or contraction) of U.S. oil production is price signals. Absolute growth slowed in 2023 and 2024, but that reflected crude oil prices pulling back from the $101 Brent had fetched in 2022 during the initial dislocations caused by the war in Ukraine. The advent of U.S. shale oil production in the late 2000s also sharply accelerated the pace of the response to prices. Previously, most oil projects took three to five years to develop. With shale, one can see large price shifts impact production volumes only six to nine months later. 

The Energy Information Administration (EIA), which is independent of the Biden administration, forecasts only slight growth in 2025, averaging 13.5 million bpd for the year, as Brent prices fall into the mid-$70s. There is an unusually strong consensus among analysts and investors about this mildly bearish outlook for 2025 since there is plenty of spare capacity in OPEC+, which seems intent on unwinding the deep production cuts undertaken in recent years. It also is becoming clear that the post-pandemic demand growth levels that oil bulls had hoped for are not materializing. China, long the driver of global energy demand growth, is experiencing economic malaise, and surging sales of EVs are also hitting its appetite.

Against this backdrop, we also are beginning to see a policy shift from OPEC+. Saudi Arabia has had spending levels that the International Monetary Fund (IMF) said would require $96 per barrel to cover in 2024. They had hoped to be able to support prices at a level close to $100 per barrel, which would fund their ambitious Vision 2030 economic diversification plans. Saudi policymakers now understand that prices near that level produce too much growth in the United States (and some elsewhere) to be sustainable. They have delayed OPEC+ production increases until next year, given the price drop we already have seen this fall. Unless some event takes off a lot of volume elsewhere, the market will not need to see a lot of U.S. growth in 2025, and prices will act accordingly. The Saudis can borrow to cover their development plans, at least in the near term, but the problem they face will not be much different than it would have been under a Harris Presidency.

Ironically, Big Oil has actually learned to like some of Biden’s policy initiatives. ExxonMobil CEO Darren Woods recently publicly urged President Trump to keep Biden-era rules on curtailing methane leakage, since the company already has invested heavily in complying with them. In general, the industry prefers stable policy with incremental changes rather than a partisan pendulum swinging back and forth and complicating its management and investment decisions.

About the Author: Greg Priddy

Greg Priddy is a Senior Fellow at the Center for the National Interest and does consulting work related to political risk for the energy sector and financial clients. Previously, he was director of global oil at Eurasia Group and worked at the U.S. Department of Energy.

Image: Shutterstock.