Harold Hamm Sounds the Alarm: Low Oil Prices Could Shut Down US Shale
Shale titan Harold Hamm isn’t mincing words—if oil prices stay this low, drilling in some of America’s prized shale fields could grind to a halt. Speaking at CERAWeek in Houston, the Continental Resources founder warned that with oil hovering near $65 a barrel, many U.S. fields are already on shaky ground. “When you get below the cost of supply, you can’t ‘drill, baby, drill,’” Hamm told Bloomberg. “That shuts you down.”
It’s not exactly the raucous celebration oil executives had in mind when they gathered in Houston under the banner of Trump’s second-term Energy Dominance agenda.
Yes, industry leaders were quick to cheer the rollback of Biden-era climate policies. But President Trump’s aggressive trade stance is giving some in the industry a case of the jitters. His latest tariff war with Canada has placed downward pressure on crude oil prices--a scenario that President Trump has referred to as “phenomenal news.”
And it is for some. The oil industry's mood, however, is just shy of celebratory.
It’s not just Hamm. ConocoPhillips CEO Ryan Lance warned that inflationary pressures are creeping back into the system, while investors are skittish about how Trump’s on-again, off-again trade policies will impact energy markets.
BlackRock’s Larry Fink put it bluntly: “The only way we can navigate this—it’s not by cutting because cutting is going to destroy the economy. We must grow the economy.”
Meanwhile, the U.S. is still the world’s largest oil producer. But industry leaders are suggesting there are limits. Occidental Petroleum CEO Vicki Hollub, for one, has predicted that American crude production will likely peak between 2027 and 2030 before beginning a slow decline.
For now, the low oil prices are great for consumers. It’s not so great for the companies pulling it out of the ground. If prices stay low, even with regulatory relief, the shale boom may finally hit a wall.
By Julianne Geiger for Oilprice.com
Drillers Brace for Fallout from Steel, Aluminum Tariffs
The latest targets of Trump’s tariff offensive were steel and aluminum—both critical metals for the oil and gas industry.
WoodMackenzie: U.S. drillers imported some 40% of the so-called oil country tubular goods they needed last year.
Enverus: “It's probably going to be harder for service companies in 2025 to maintain their activity levels and their pricing,”.
Oil and gas drillers are bracing for the effects of the latest round of tariffs that President Trump has adopted in his attempts to revive domestic industries and punish U.S. trade partners for what he sees as unfair treatment for years. Luckily, the effect is unlikely to be all that serious.
The latest targets of Trump’s tariff offensive were steel and aluminum—both critical metals for the oil and gas industry. The president slapped an import tariff of 25% on all steel and aluminum entering the United States, angering the European Union, which threatened counter-tariffs, saying that “Tariffs are taxes. They are bad for business, and even worse for consumers,” per European Commission President Ursula von der Leyen.
Many disagree with Trump’s approach to trade policy and many support it, sharing the perception that U.S. manufacturers have been short-changed by trade partners for decades. For oil and gas drillers, however, the new import tariffs on steel and aluminum would mean higher costs at a time when oil prices are depressed.
“About 14% of what we buy, it comes from countries that will be impacted by tariffs,” Andy Hendricks, the chief executive of Patterson-UTI, which is among the biggest providers of drilling equipment, told Reuters. “If you layer on tariffs, it could affect us in the low single digits in terms of our costs going up for what we do.”
Single-digit does not sound like a lot, and the effect of tariffs is further mitigated by the fact that U.S. drilling equipment and services providers do not import all of the hot-rolled steel and aluminum they need. Per Wood Mackenzie figures, U.S. drillers imported some 40% of the so-called oil country tubular goods they needed last year. This year, just 16% of that total imported volume came from Canada and Mexico as sector players anticipated the tariff offensive. As part of that anticipation, they stocked up on OCTG from Canada and Mexico ahead of the tariffs.
Opinions on the impact of tariffs differ, however. Rystad Energy, for instance, expects the import duties to have a double-digit effect on costs in the oil and gas industry, raising them by an estimated 15%, or $890 per ton of OCTG. S&P Global Commodity Insights agrees. “It's probably going to be harder for service companies in 2025 to maintain their activity levels and their pricing,” Enverus principal analyst for OFS Intelligence Mark Chapman told Reuters.
That, however, is a small part of drillers’ total costs, strengthening the perception that the ultimate impact of tariffs on the oilfield services industry will be manageable. “OCTGs represent about 8.5% of drilling and completion costs for onshore wells in the Lower 48 states. So if prices rose by 25%, about 2.1% would be added to well costs,” Wood Mackenzie analyst Nathan Nemeth told Reuters.
Yet American steel producers are set to benefit from the tariffs, which is what the purpose of the exercise is, after all. Ultimately, the idea is to become more self-reliant rather than reliant on external suppliers of key goods. Theoretically, protectionism makes sense. In practice, last time Trump imposed tariffs in steel and aluminum imports, so many exemptions followed after heavy lobbying from heavy steel users that the tariffs basically became useless. Interestingly, when President Biden took office after Trump’s first term, he did not cancel the tariffs. Instead, he set quotas for imports above which the tariffs would apply, demonstrating a milder version of Trump’s protectionism.
The oilfield services industry did not collapse in 2018 when Trump introduced his first tariffs on steel and aluminum, and chances are it will not collapse now, either. There will probably be exemptions from the current tariff regime, and there may be tweaks to it in order to shield domestic industries from the worst of the fallout until the market self-regulates.
By Irina Slav for Oilprice.com
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