(Bloomberg) — Terrel Hardin was at a diner along Route 66 in western Oklahoma when his phone rang with bad news: The engine on one of his oil rigs had broken. In times past it would be a straightforward $6,000 fix, but President Donald Trump’s trade war has upended supply chains, and he wasn’t sure the part would even be available.
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Tariffs and uncertainty over equipment deliveries mean what was once routine for Hardin’s King Well Service Inc. is now a source of anxiety. It’s made all the worse by plunging crude prices, triggered in part by the trade disputes, that threaten to slow drilling of new wells.
“It’s not really being helped by what Trump is doing,” the 63-year-old said. “He’s a hell of a lot smarter than I am, but I’m not sure that he wakes up every morning saying, ‘God, I hope oil goes back to $70,’” he said. “Like I do.”
The US oil industry strongly supported Trump’s campaign for a second term, but some executives are now feeling shortchanged. The president’s trade policy has made buying and repairing equipment more expensive at the same time crude has tumbled more than 20% since his inauguration, further undermined by a surge in supply from OPEC.
Falling oil prices help achieve a key pledge of Trump’s campaign — to lower inflation — and are generally good for the economy writ large and popular with voters. But now that the US is the world’s top crude producer, that slide is straining Republican strongholds like Texas, Oklahoma and North Dakota.
“You can’t have $50 oil and ‘Drill, Baby, Drill,’” said Andy Hendricks, the CEO of Patterson-UTI Energy Inc., which operates the second-largest fleet of US onshore drilling rigs. “Those two things are incompatible.”
Executives from several private and independent oil companies have met in recent weeks with Texas Senator Ted Cruz, Energy Secretary Chris Wright, Environmental Protection Agency administrator Lee Zeldin and congressional representatives, according to company officials. The message they’re promoting is Trump’s trade war and repeated praise for falling oil prices risk pushing record US production into decline.
While oil majors like Exxon Mobil Corp. and Chevron Corp. are content to ride out the storm, especially if it means less regulation and easier permitting over the long term, the smaller independent producers who are the backbone of the US shale industry are starting to push back.
“The industry’s message to Congress is ‘Take back your authority,’” said Steven Pruett, the chief executive officer of Midland, Texas-based Elevation Resources LLC, who met with Cruz last month. He’s concerned that major economic policy is being set by executive fiat. “That’s no way to run a country, and it’s impossible for corporate leaders to run their businesses.”
Cruz’s office didn’t respond to an email and phone call seeking comment. Representatives for the EPA and Energy Department said the agencies are focused on slashing regulations to drive down costs for consumers and lower expenses for oil companies, which will ultimately make them more profitable.
Trump is scheduled to visit the Middle East soon, meeting leaders of OPEC countries who this month agreed to raise production levels, sending West Texas Intermediate as low as $55 a barrel, well under what many US shale fields need to break even. Several of the executives interviewed said they want Trump to provide tariff carve-outs for oil field equipment and set a floor under oil prices by persuading OPEC leaders to restrain production, like he did after the price collapse in early 2020, or by refilling the Strategic Petroleum Reserve.
Kirk Edwards, a former chairman of the Permian Basin Petroleum Association, voted for Trump last year and regularly supports Republican causes. There’s a framed picture on the wall of his office in Odessa, Texas, of himself and the president standing side-by-side with their thumbs up at a fundraiser last year.
“There’s nothing more American than the oil and gas industry,” said Edwards, who runs a small privately-held oil producer. “So why are we being picked on as a scapegoat in this whole tariff plan?”
It isn’t hard to see why he’s so concerned. With crude prices below the average break-even price for most new US onshore wells, oil companies aren’t positioned to meet the president’s call to unleash energy dominance, said Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington. “Their investors don’t care about energy dominance,” he said. “They want energy dividends.”
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But of course for every oil executive or roughneck lamenting the drop in oil prices, many more Americans appreciate lower gasoline prices and the relief that provides for household budgets.
The Trump administration has already taken steps that could lower costs for offshore oil operations, including regulatory changes expected to allow companies to simultaneously pull crude from multiple Gulf of Mexico reservoirs, boosting output and potentially unlocking stranded reserves. The Interior Department has announced plans that could lower costs for offshore producers by revising requirements forcing them to set aside financial assurance guarantees to cover the cost of cleaning up old wells and infrastructure. The EPA, meanwhile, is pursuing efforts that could lower cost for onshore operators, too.
Trump inherited a US oil industry at the peak of its powers, producing a near-record 13.5 million barrels a day. It provided jobs and a level of energy independence the US hadn’t seen since before the OPEC oil embargos of the 1970s. Trump’s pledges to support America’s “liquid gold” energized supporters in the oil field who felt under attack by President Joe Biden’s environmental policies.
But four months after Trump’s inauguration, producers are cutting crews, mothballing rigs and reining in spending as they grapple with rising costs and lower revenue because of the oil price plunge.
“As a result of these activity cuts, it is likely that US onshore oil production has peaked and will begin to decline this quarter,” Travis Stice, the CEO of Diamondback Energy Inc., the biggest independent producer in the Permian Basin of western Texas and eastern New Mexico, said in a letter to shareholders. “We are at a tipping point.”
The main road through the heart of Texas oil country includes a 15-mile stretch of Interstate 20 between Midland and Odessa that might be the biggest concentration of steel for sale in America. The area is like an open-air shopping mall providing everything needed to pump crude oil. Drilling rigs and powerful generators for fracking fleets operated by the world’s biggest oil field service companies sit alongside family-owned retailers selling pipes, pumps, hard hats and flame retardant overalls.
Much of the equipment is imported from China, Korea, Brazil and Mexico, meaning it’s subject to tariffs. Prices for tubular goods used in the industry, which includes pipes, are forecast to jump by 40% year-on-year in the fourth quarter of 2025, according to Wood Mackenzie, an industry consultant.
Tie Specialties, a store along that section of highway, is the “Home Depot of the oil field,” according to its owner, Mark Waters. He backs Trump’s tariffs and push for low energy prices because he thinks they will be good for the country in the long-term. That said, he accepts he will make less money in the short term. Sales were down about 15% in April from a year earlier.
“I smile when these guys are gung-ho on the Republican Party,” Waters said. “We make our money during Democratic administrations. I killed it during Clinton, Obama, Biden.”
It isn’t a popular message in West Texas.
“I said that at the country club and I thought somebody was going to kill me with a butter knife,” Waters joked.
Wright, Trump’s energy secretary, was a familiar face in Midland as CEO of the fracking company Liberty Energy Inc. before his appointment. He knows only too well the price being paid by his former friends in the oil business: Shares of Liberty are down almost 50% since Trump’s inauguration on Jan. 20.
Wright maintains the Trump administration doesn’t set oil prices and is focused on removing “artificial barriers” to production such as excessive regulations and climate rules.
“Our goal is to make it easier to produce energy in the United States,” he said in an interview with Bloomberg TV on April 25.
But he appeared to acknowledge the pain in the oil patch.
“Fifty dollars, in today’s world, I think is not sustainable for producers in this country,” he said. “A good place is where you have healthy consumers, you have healthy producers.”
Independent US oil explorers have announced over the past several weeks a combined $1.8 billion in spending cuts, with most of that shrinking activity coming in the Permian Basin, the world’s biggest shale patch. For now, many of the companies, including Occidental Petroleum Corp. and Devon Energy Corp., say that greater efficiencies in the field will mean little or no impact to production this year.
But the outlook a little bit down the line is less rosy. A 10% cut to US capital expenditure would mean a 400,000 barrel-a-day drop in production, according to S&P Global. And nearly everyone agrees that if oil prices continue dropping to the low $50 range, more reductions would have to come.
An electronic sign across the road from the Petroleum Club in Midland, Texas, sums up the mood. On a recent afternoon, its display cycled through the falling number of rigs deployed across the Permian Basin and the plunging price of crude.
It also displayed a quote often attributed to Winston Churchill: “However beautiful the strategy, you should occasionally look at the results.”
–With assistance from Jennifer A. Dlouhy and Ari Natter.
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