(Bloomberg) — U.S. Energy Secretary Chris Wright said it’s “unlikely” the country’s oil production will drop next year, contrary to the expectations released this week by a government agency.
Much will depend on oil prices and whether producers will follow through on pledges to reduce investment, Wright said in an interview on Bloomberg Television. The Energy Information Administration revised down its view of U.S. production Tuesday, anticipating the first drop in output since 2021.
“That is a projection—we don’t know what’s going to happen next year,” Wright said. “We have seen weak prices for a few months, and if prices are too low for an economic incentive, you’ll see some drilling reduce on the margin. I think it’s unlikely you’ll see enough reduction to actually see a decline in production next year.”
US shale producers have been pulling rigs and cutting workers since the beginning of the year as crude tumbled into the $60-a-barrel range due to supply increases from OPEC and President Donald Trump’s consistent praise for low energy prices. But uncertainty in the Middle East saw Brent prices rally 4.3% to settle at $69.77 on Wednesday.
“This administration is making it lower cost for them to drill wells and therefore a lower threshold at which they would start to pull back activity,” Wright said.
The Trump administration’s efforts to ease permitting and loosen regulations may help lower costs in the long run, but many producers are facing higher costs due to tariffs and running out of prime drilling locations. U.S. production is at a “tipping point” and has likely peaked, Diamondback Energy Inc., the latest independent oil producer in the Permian basin, said last month.
Chevron Corp. and Apache Corp. have announced major job cuts this year, but Wright said lower energy prices are of higher priority than falling employment in oil and gas.
“The goal is not to create jobs in any particular industry,” he said. “The constituency of this president is the American economy and the American consumer.”
Repairs to the U.S. Strategic Petroleum Reserve should be completed this year, Wright said. The caverns, which store crude in case of emergencies, suffered $100 million worth of damage when then-President Joe Biden drained them after oil prices spiked following Russia’s invasion of Ukraine, Wright said.
The reserve would get $2 billion in House Republicans’ massive tax bill, a sum that should cover the repairs and some oil purchases in the future, Wright said.
“It’s going to be a multiyear process to refill the SPR,” Wright said, “but we’ve got to work on that every year.”
