Oil patch Blues: Despite Trump‘s Support, Energy Sector Contracts Amidst Costs & Policy Chaos
By Priyashah, World-today-News.com – June 4, 2025
HOUSTON, TX – While president Donald Trump publicly champions increased oil production, a new report paints a starkly different picture of the U.S. energy sector. The latest Dallas Fed Energy Survey reveals a contraction in oil and gas activity during the third quarter of 2025, fueled by soaring costs, unpredictable policies, and the biting impact of new tariffs.
The survey, released Wednesday, polled executives from 139 firms across texas, northern Louisiana, and southern New Mexico in mid-September. Its broadest measure of business conditions, the business activity index, registered a negative 6.5 – marking the second consecutive quarter of decline. The outlook is even more concerning,with the company outlook index plummeting to -17.6 from -6.4 in the previous quarter.
Policy Uncertainty & Tariffs Take Their Toll
The data underscores a growing disconnect between the administration’s rhetoric and the reality on the ground. Over 44% of firms surveyed cited elevated levels of uncertainty,directly linking it to the current administration’s policies.
“The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch,” one anonymous executive stated bluntly. “Those who can are running for the exits.”
The imposition of important tariffs, particularly the 50% levy on steel and aluminum, is exacerbating the situation. Executives report these tariffs are dramatically increasing operational costs, rendering some wells economically unviable.
“Tariffs continue to increase the cost of production. We are suffering from a combination of increased cost due to tariffs and downward pricing pressure from end users,” a services executive lamented.
Bleeding Margins & Slashing Investment
The financial strain is palpable. exploration and production firms saw finding and advancement costs double this quarter, while lease operating expenses also surged. Oilfield services firms are reporting deeply negative margins, with one describing the sector as “bleeding.”
This challenging environment is triggering a sharp decline in capital expenditure, with the index falling to -11.6 from -3.0. Executives warn that the constant shifts in regulatory policy are deterring investment.
“Day-to-day changes to energy policy is no way for us to win as a country,” one operator argued. ”Investors avoid investing in energy because of the volatility … and the ‘stroke of pen’ risk that the federal government wields.”
Grim Price Expectations & The Future of Shale
The survey also reveals a pessimistic outlook on oil prices. Respondents now predict West texas Intermediate (WTI) crude will average just $63 a barrel by the end of 2025,barely above current trading levels. Longer-term projections, at $69 in two years and $77 in five years, are considered insufficient by many autonomous operators to justify new drilling initiatives.
This confluence of factors raises serious questions about the future of the shale revolution, a decade-long boom that transformed the U.S.into a major energy producer.
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