Trump's oil pledges face greater challenges than those posed by Biden's new offshore drilling prohibition
President Joe Biden's decision to safeguard offshore regions is primarily symbolic; however, the economic factors that could restrict increases in oil production are quite substantial.
TroibNews 
President-elect Donald Trump might face challenges in fulfilling his promises to significantly boost oil production, even if he successfully reverses President Joe Biden’s extensive ban on offshore drilling.
Energy analysts have pointed to a combination of factors that may hinder the ability of U.S. producers to increase output. The cautious approach of oil companies, the growing prevalence of fuel-efficient vehicles, and potential trade conflicts stemming from Trump's policies are likely to limit production growth, despite his campaign assertions of achieving energy “dominance.” Additionally, with the U.S. already ranking as the world’s leading oil producer and largest gas exporter, achieving notable increases may prove difficult.
Biden's recent ban on oil and gas lease sales across 625 million acres of federal waters is expected to have limited practical impact, primarily targeting regions that were already heavily restricted due to political pressures or other obstacles preventing oil rig developments.
Trump, who campaigned on a platform aimed at halving U.S. energy prices and boosting oil production, pledged to immediately reverse Biden's ban upon taking office on January 20. “It’s ridiculous. I’ll unban it immediately,” Trump asserted during an interview with radio host Hugh Hewitt, shortly after the Biden administration's announcement. “It’ll be changed on Day One.”
However, analysts have cautioned that he may encounter legal challenges in his attempt to overturn Biden's ban and could require congressional support to achieve such a reversal. The obstacles he faces in realizing his broader goals for an uptick in drilling production remain significant.
**Economic Challenges**
Trump may aspire to direct the oil industry towards public lands, but he cannot mandate drilling activity. He has vowed to undo Biden’s moratorium on new offshore drilling projects, expand access to additional federal lands for drilling—including the contentious Arctic National Wildlife Refuge—and reduce royalties and fees associated with oil production on public land. While these proposals are favorable to oil industry lobbyists, they may not result in increased production, analysts suggest.
According to Bob Ryan, head of Ryan Commodity Insights, companies have assured investors that they will only produce as much oil as the market demands, avoiding the debt accrued in previous decades. Therefore, U.S. oil companies and members of OPEC and its allies are unlikely to increase production unless there is clear evidence of robust demand. “Trump can make the regulatory environment more accommodative to oil producers, but the market will let them know when higher output is needed,” Ryan noted.
Analysts at Macquarie echoed this sentiment: “Our 2025 [forecasts] don’t have large U.S. supply growth or OPEC+ returning, and Trump 2.0 is neutral,” they reported in a recent market note.
Although oil prices have risen since Thanksgiving, they remain lower than levels seen a year earlier, making it unlikely that the substantial investments Trump desires for new drilling will be forthcoming. A recent survey conducted by the Federal Reserve Bank of Dallas found that 42% of U.S. oil executives anticipated their expenditures on new projects in 2025 would either remain the same or decrease compared to the previous year, while 43% expected only a slight increase.
The primary issue appears to be the uncertainty surrounding oil consumption, particularly influenced by China’s increasing demand, a country that has recently dominated global oil consumption growth.
Industry leaders have indicated that access to domestic oil reserves is not a significant issue, as most production occurs on private land, particularly in New Mexico and Texas. Environmental advocates have pointed out the numerous leases companies hold for federal land that are currently unused, suggesting that there is no pressing need for additional public drilling sites.
Ultimately, any growth in U.S. oil production is likely to be dictated more by market dynamics than Trump’s proposed policies, according to Tamas Varga of PVM Oil Associates. “The growth in oil production will be determined by market forces, shareholder pressure, [capital expenditures] and oil prices,” he stated. “Therefore, the increase will not be measured in millions of barrels per day but a few hundred thousand barrels per day, if that.”
**Impact of Cleaner Vehicles**
Global gasoline demand is projected to peak this year as electric vehicle (EV) adoption rises and gasoline-powered vehicle efficiency improves, per S&P Global analysis. This shift is expected to depress profits from fossil fuel sales for oil companies.
As Republicans consider cutting Biden’s incentives for electric vehicles in the U.S., demand for zero-emission transportation is surging in China, where the largest automakers are pivoting toward EV manufacturing. This trend is poised to impact oil demand negatively, especially as China looks to solidify its position in the international EV market.
According to Wood Mackenzie, EV sales in China are likely to reach a 66% market share by 2034, contributing to an annual growth rate of 8% through 2030, in stark contrast to an expected 11% decline for internal combustion engine models.
“Wherever you are, Chinese EVs are coming your way,” remarked Malcolm Forbes-Cable from Wood Mackenzie.
This growth trend aligns with the International Energy Agency's prediction that global oil demand will level off by 2030, attributing the plateau to the influence of renewables, electric vehicles, and improvements in fuel economy.
**Permit Process Issues**
Both the oil industry and supporters of renewable energy recognize the need to streamline the federal permitting process. Delays and legal hurdles hamper the construction of infrastructure projects crucial for increased energy delivery, effectively prolonging timelines and complicating efforts to expand energy supply.
Despite a bipartisan acknowledgment of the need for updates to permitting regulations, legislative progress has stalled. In the closing weeks of Biden’s presidency, lawmakers from both parties were unable to forge a compromise, as concerns over conceding too much to the opposing side led to a failure to enact reforms.
In a few weeks, the GOP will assume unified control of the government, yet it appears that the party’s focus will remain on budget issues, leaving little room for comprehensive changes to the permitting process.
**Trade Policy Complications**
During Trump’s previous term, trade policies often conflicted with energy objectives, and recent tariff threats suggest a repeat could be on the horizon. Trump has announced a potential 25% tariff on all goods from Canada and Mexico unless they mitigate migration and drug trafficking. This measure could raise costs for the more than 3 million barrels of heavy crude oil imported daily from these countries—an inflationary move that would likely reduce domestic fuel demand, as U.S. refineries cannot easily substitute domestically produced "light" oil for heavy crude inputs.
Energy consultancy ClearView Energy Partners noted that tariffs could jeopardize supplies of heavy crude from Canada, the primary U.S. source for this type of oil, which would be challenging to replace. Such tariffs could disrupt gasoline production by removing a critical supply chain element, as heavy crude imports constitute roughly 18% of U.S. refining inputs.
“We understand President Trump’s agenda with respect to tariffs, but we feel strongly that he should consider walling off energy,” commented Tom Pyle, president of the conservative Institute for Energy Research, emphasizing the importance of maintaining reliable trade relationships with Canada.
Additionally, Trump's expected expansion of steel tariffs could increase costs for oil producers, complicating project financing. Past tariff hikes contributed to the shelving of crucial gas export initiatives in Alaska.
Trump's immigration policies, particularly his stance on mass deportation, may also deplete the labor pool for an oil industry already contending with workforce shortages. Collectively, these components of Trump’s trade and immigration policies could elevate operational costs for energy companies, thereby impacting consumers and dampening overall fuel demand.
Allen M Lee for TROIB News
Energy analysts have pointed to a combination of factors that may hinder the ability of U.S. producers to increase output. The cautious approach of oil companies, the growing prevalence of fuel-efficient vehicles, and potential trade conflicts stemming from Trump's policies are likely to limit production growth, despite his campaign assertions of achieving energy “dominance.” Additionally, with the U.S. already ranking as the world’s leading oil producer and largest gas exporter, achieving notable increases may prove difficult.
Biden's recent ban on oil and gas lease sales across 625 million acres of federal waters is expected to have limited practical impact, primarily targeting regions that were already heavily restricted due to political pressures or other obstacles preventing oil rig developments.
Trump, who campaigned on a platform aimed at halving U.S. energy prices and boosting oil production, pledged to immediately reverse Biden's ban upon taking office on January 20. “It’s ridiculous. I’ll unban it immediately,” Trump asserted during an interview with radio host Hugh Hewitt, shortly after the Biden administration's announcement. “It’ll be changed on Day One.”
However, analysts have cautioned that he may encounter legal challenges in his attempt to overturn Biden's ban and could require congressional support to achieve such a reversal. The obstacles he faces in realizing his broader goals for an uptick in drilling production remain significant.
**Economic Challenges**
Trump may aspire to direct the oil industry towards public lands, but he cannot mandate drilling activity. He has vowed to undo Biden’s moratorium on new offshore drilling projects, expand access to additional federal lands for drilling—including the contentious Arctic National Wildlife Refuge—and reduce royalties and fees associated with oil production on public land. While these proposals are favorable to oil industry lobbyists, they may not result in increased production, analysts suggest.
According to Bob Ryan, head of Ryan Commodity Insights, companies have assured investors that they will only produce as much oil as the market demands, avoiding the debt accrued in previous decades. Therefore, U.S. oil companies and members of OPEC and its allies are unlikely to increase production unless there is clear evidence of robust demand. “Trump can make the regulatory environment more accommodative to oil producers, but the market will let them know when higher output is needed,” Ryan noted.
Analysts at Macquarie echoed this sentiment: “Our 2025 [forecasts] don’t have large U.S. supply growth or OPEC+ returning, and Trump 2.0 is neutral,” they reported in a recent market note.
Although oil prices have risen since Thanksgiving, they remain lower than levels seen a year earlier, making it unlikely that the substantial investments Trump desires for new drilling will be forthcoming. A recent survey conducted by the Federal Reserve Bank of Dallas found that 42% of U.S. oil executives anticipated their expenditures on new projects in 2025 would either remain the same or decrease compared to the previous year, while 43% expected only a slight increase.
The primary issue appears to be the uncertainty surrounding oil consumption, particularly influenced by China’s increasing demand, a country that has recently dominated global oil consumption growth.
Industry leaders have indicated that access to domestic oil reserves is not a significant issue, as most production occurs on private land, particularly in New Mexico and Texas. Environmental advocates have pointed out the numerous leases companies hold for federal land that are currently unused, suggesting that there is no pressing need for additional public drilling sites.
Ultimately, any growth in U.S. oil production is likely to be dictated more by market dynamics than Trump’s proposed policies, according to Tamas Varga of PVM Oil Associates. “The growth in oil production will be determined by market forces, shareholder pressure, [capital expenditures] and oil prices,” he stated. “Therefore, the increase will not be measured in millions of barrels per day but a few hundred thousand barrels per day, if that.”
**Impact of Cleaner Vehicles**
Global gasoline demand is projected to peak this year as electric vehicle (EV) adoption rises and gasoline-powered vehicle efficiency improves, per S&P Global analysis. This shift is expected to depress profits from fossil fuel sales for oil companies.
As Republicans consider cutting Biden’s incentives for electric vehicles in the U.S., demand for zero-emission transportation is surging in China, where the largest automakers are pivoting toward EV manufacturing. This trend is poised to impact oil demand negatively, especially as China looks to solidify its position in the international EV market.
According to Wood Mackenzie, EV sales in China are likely to reach a 66% market share by 2034, contributing to an annual growth rate of 8% through 2030, in stark contrast to an expected 11% decline for internal combustion engine models.
“Wherever you are, Chinese EVs are coming your way,” remarked Malcolm Forbes-Cable from Wood Mackenzie.
This growth trend aligns with the International Energy Agency's prediction that global oil demand will level off by 2030, attributing the plateau to the influence of renewables, electric vehicles, and improvements in fuel economy.
**Permit Process Issues**
Both the oil industry and supporters of renewable energy recognize the need to streamline the federal permitting process. Delays and legal hurdles hamper the construction of infrastructure projects crucial for increased energy delivery, effectively prolonging timelines and complicating efforts to expand energy supply.
Despite a bipartisan acknowledgment of the need for updates to permitting regulations, legislative progress has stalled. In the closing weeks of Biden’s presidency, lawmakers from both parties were unable to forge a compromise, as concerns over conceding too much to the opposing side led to a failure to enact reforms.
In a few weeks, the GOP will assume unified control of the government, yet it appears that the party’s focus will remain on budget issues, leaving little room for comprehensive changes to the permitting process.
**Trade Policy Complications**
During Trump’s previous term, trade policies often conflicted with energy objectives, and recent tariff threats suggest a repeat could be on the horizon. Trump has announced a potential 25% tariff on all goods from Canada and Mexico unless they mitigate migration and drug trafficking. This measure could raise costs for the more than 3 million barrels of heavy crude oil imported daily from these countries—an inflationary move that would likely reduce domestic fuel demand, as U.S. refineries cannot easily substitute domestically produced "light" oil for heavy crude inputs.
Energy consultancy ClearView Energy Partners noted that tariffs could jeopardize supplies of heavy crude from Canada, the primary U.S. source for this type of oil, which would be challenging to replace. Such tariffs could disrupt gasoline production by removing a critical supply chain element, as heavy crude imports constitute roughly 18% of U.S. refining inputs.
“We understand President Trump’s agenda with respect to tariffs, but we feel strongly that he should consider walling off energy,” commented Tom Pyle, president of the conservative Institute for Energy Research, emphasizing the importance of maintaining reliable trade relationships with Canada.
Additionally, Trump's expected expansion of steel tariffs could increase costs for oil producers, complicating project financing. Past tariff hikes contributed to the shelving of crucial gas export initiatives in Alaska.
Trump's immigration policies, particularly his stance on mass deportation, may also deplete the labor pool for an oil industry already contending with workforce shortages. Collectively, these components of Trump’s trade and immigration policies could elevate operational costs for energy companies, thereby impacting consumers and dampening overall fuel demand.
Allen M Lee for TROIB News
