Former President Donald Trump has long championed the mantra of “drill, baby, drill”, pushing for an increase in U.S. oil production. However, his aggressive agenda for boosting domestic energy output may not be as appealing to oil producers and investors as one might expect. With a shift in global market conditions and investor priorities, this strategy could have unintended consequences.
The United States has reached unprecedented levels of oil production in recent years. In December 2024, the U.S. produced a staggering 13.49 million barrels per day (bpd), setting a new record for crude output, according to the U.S. Energy Information Administration (EIA). This achievement places the U.S. firmly at the top of global oil producers, surpassing traditional giants like Russia and Saudi Arabia.
While high production numbers can drive down prices, benefiting consumers, the reality for producers is more complex. Excessive production, without a corresponding demand increase, can flood the market, causing prices to drop. This scenario often leads to lower profits for oil companies, making them more cautious about capital expenditures.
Even with record-breaking output, oil prices have remained volatile, and this is where the concerns begin. Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, explains that low oil prices could prompt U.S. companies to reduce their capital spending. He notes, “Right now, with low oil prices, I think we’re going to start to see a lot of companies starting to pare back on their capital spending.”
In 2025, the price of West Texas Intermediate (WTI), the U.S. benchmark for crude oil, has hovered below $70 per barrel, with S&P Global Commodity Insights projecting an average price of $66 per barrel for the year. While these prices aren’t disastrous, they’re not enough to incentivize further expansion, especially when compared to the $100+ prices seen during the boom years of the previous decade.
Consumers typically feel the effects of oil price fluctuations at the gas pump, where gasoline prices are a direct reflection of crude oil costs. As of March 24, 2025, the average price of regular unleaded gasoline was approximately $3.10 per gallon, as reported by GasBuddy. This is significantly lower than the $5+ per gallon highs seen in June 2022, but it still represents a fluctuating market that can cause uncertainty.
In fact, U.S. gasoline prices are expected to continue their downward trend, with the EIA forecasting a 11-cent drop in 2025 and a 19-cent decrease in 2026. While these drops provide relief to consumers, the lower gas prices also place pressure on oil producers to maintain profitability at reduced rates.
The relationship between crude oil prices and gasoline prices is a critical one. According to EIA data, crude oil costs accounted for about 52.6% of the average retail price of gasoline in 2023, with refining, distribution, and taxes making up the rest. This demonstrates the crucial role that oil prices play in determining the cost at the pump, and the significance of price stability for oil companies.
If crude prices remain below $70 per barrel, oil producers may be less inclined to invest in new exploration or drilling activities. Investors, especially those with a focus on long-term returns, are likely to push for sustainable growth rather than expansion at the risk of overproduction and price instability.
Investors are becoming increasingly cautious about the future of the oil and gas sector. With global concerns over climate change and a growing shift towards renewable energy sources, the outlook for traditional oil companies is more uncertain than ever. Many investors are seeking companies with a strong focus on profitability and capital discipline, rather than those pursuing reckless expansion at the cost of long-term sustainability.
In response, some of the largest oil companies, including ExxonMobil and Chevron, have recently signaled their intent to slow down spending in favor of focusing on shareholder returns, debt reduction, and cleaner energy investments. This trend reflects a broader shift away from the “drill, baby, drill” mentality, as companies recognize the importance of maintaining financial health amid an uncertain market.
While Trump’s “drill, baby, drill” slogan may have resonated with many Americans seeking energy independence, it doesn’t necessarily align with the priorities of oil producers and investors in the current economic landscape. With oil prices remaining volatile and concerns about sustainability growing, the future of U.S. oil production will likely depend on striking a balance between meeting demand and maintaining long-term profitability.
As oil companies navigate this delicate balance, their ability to adapt to changing market conditions, manage capital expenditure, and respond to investor demands will be key to their success in the coming years. Whether Trump’s push for increased drilling will ultimately be beneficial or detrimental remains to be seen, but for now, many in the industry are taking a more cautious approach.