By Mark Jaffe, EUCI energy writer
The Trump administration’s goal of “energy dominance” and its mantra of “drill, baby, drill” have run into production limitations, economic uncertainty caused by the administration’s tariff policies, and increased output from OPEC+.
In his first weeks in office, President Donald Trump issued executive orders to speed permitting, reduce regulations, and open more federal land to drilling. Treasury Secretary Scott Bessent said the goal is to boost production by three million barrels a day.
But even before economies and markets were roiled by the administration’s off-again-on-again tariffs, getting to an additional three million barrels was a high bar.
In 2024, the U.S. produced an average 13.2 million barrels of oil a day, a record and a 3.8% increase over 2023. The country exported a record 4.1 million barrels a day, according to the federal Energy Information Administration (EIA).
Adding another three million barrels of production would require a nearly 23% increase over 2024, which some industry analyst say is beyond the current production capacity of oil and gas operators. The EIA is projecting a 2.3% increase in output for 2025 and less than a 1% in 2026.
That, however, was before the Trump administration launched worldwide tariffs that economists warn could slow economic growth and lead to a recession.
Even though most of the highest tariffs have been postponed for at least 90 days, there is now an across-the-board 10% tariff, higher tariffs on Mexico and Canda, higher steel and aluminum tariffs and a 145% tariff on China.
The investment bank Goldman Sachs put the chances of a recession in the U.S. in the next 12 months at 45%.
“We now see a materially higher risk of a global recession,” Bruce Kasman, J.P. Morgan chief global economist, said in a note. “The administration’s shift in the application of tariff policy and the potential impact on sentiment have contributed to this increased risk.”
A slowing economy would reduce the demand for oil, and oil prices have already softened. The EIA reduced its forecast for the increase in global oil consumption for 2025 by 31% to an additional 900,000 barrels a day and cut the 2026 forecast increase by 10% to 1 million barrels a day.
The world used an estimated 103 million barrels of oil a day in 2024, according to the International Energy Agency.
Declining demand translates to lower oil prices. Goldman Sachs cut its 2026 average price forecast by $4 to $58 a barrel for Brent crude and for Western Texas Intermediate (WTI) to $55.
WTI, which is the price for U.S. oil, is usually a few dollars below Brent prices.
The EIA also lowered its price projections as it expects “recent developments in global trade policy and oil production to contribute to lower global demand growth for petroleum products through 2026, which contributes to significantly lower oil prices than previously forecast.”
The EIA sees the price of Brent dropping from $81 in 2024 to $68 in 2025 and $61 in 2026. These figures are about 10% lower than the EIA’s March estimates. The lower prices will impact the ability of operators to produce oil at a profit.
The Federal Reserve Bank of Dallas surveyed 200 companies operating across all oil-producing regions – including the Permian and the Eagle Ford basins which account for more than half the output.
Large firms – with crude oil production of 10,000 barrels a day – need a $61-per-barrel price to profitably drill, based on the average of company responses, the bank survey said. Smaller firms need a WTI price at least $66 a barrel to drill at a profit.
Compounding the situation was the April 3 announcement by eight key producers in OPEC+ – which includes the 13 members of the Organization of the Petroleum Exporting Countries and 10 participating non-members – that they would be increasing production.
The eight – Saudi Arabia, Russia, United Arab Emirates, Kuwait, Iraq, Algeria, Kazakhstan, and Oman – decided to accelerate their planned output hikes.
In a statement, OPEC said “in view of continuing healthy market fundamentals,” the countries were starting a “gradual” and “flexible” return of 2.2 million barrels of day of “voluntary adjustments.”
OPEC add that “the gradual increases may be paused or reversed subject to evolving market conditions.”
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