From Yahoo Finance: 2025-04-11 06:05:00

President Donald Trump’s push for increased U.S. oil and gas production has backfired, with the industry now considering output cuts and layoffs due to higher OPEC output and tariffs. Oil prices have plummeted, making drilling unprofitable for many companies. Tariffs on steel will further deter drilling unless prices rise significantly.

The U.S., the world’s largest oil producer, is facing challenges as oil prices hover around $55 a barrel, down from $78 before Trump’s presidency. The Energy Information Administration predicts prices will remain around $63 per barrel in 2025 due to global trade policies and higher OPEC production. Layoffs and rig count reductions are already underway.

Oil producers require a price of $65 per barrel to drill profitably, with break-even costs rising to over $60 once all expenses are factored in. The Permian basin remains profitable at under $40 a barrel, but operations in North Dakota need prices around $57 to break even. Public independents may need to cut budgets and rigs if prices continue to fall.

Tariffs on steel and Chinese goods are expected to drive up drilling costs, further squeezing profit margins for oil companies. Efficiency gains have helped reduce drilling costs, but the industry is reaching the limit of technological advancements. Companies are already passing on tariff costs to customers, with further cost increases on the horizon.

Read more: OPEC output hikes, trade wars have US oil producers wary of ‘drill baby drill’