As the oil market experienced declining prices this week, Energy Secretary Chris Wright projected optimism about domestic production, despite the uncertainty fueled by tariffs and plans by the OPEC+ nations to raise output.
Oil prices hit a four-year low this week and have yet to fully rebound. Prices rose Friday but were still down on the week, with West Texas Intermediate at $61.45 per barrel, down about 50 cents on the week. Prices are down more than 15% since the start of the year.
Oil industry executives have warned that they cannot increase production unless prices are above a certain point. Nevertheless, Wright suggested Friday that he is still confident that President Donald Trump’s “Drill, baby, drill” agenda will be realized.
“You see a marketplace right now that is worried about economic growth, and I think you are seeing some softening in oil prices from that,” Wright said in an interview on Bloomberg Television. “I think that fear is misplaced.”
Wright said that he expects domestic oil producers to increase production despite the drop in oil prices.
“We are going to end out in a better economic situation than we went into this Trump term, I think by a long shot,” Wright said. “We are going to see strong growth in American energy production — 100%.”
But oil analysts said producers are likely not feeling as optimistic about the market as Wright.
“I don’t know how oil producers are going to be anywhere nearly as optimistic as he is. I think oil producers are likely going to have to start responding by scaling back any future drilling activity based on a low oil price, it’s simply not profitable,” GasBuddy oil analyst Patrick De Haan said.
In a response to a survey conducted by the Federal Reserve Bank of Dallas released in March, oil executives said that, on average, prices of $65 per barrel were needed to profitably drill new wells in the Permian Basin.
The Trump administration has made an effort to boost the domestic oil industry by deregulating and making it easier to drill, but De Haan said the path the oil market is on will not translate to an increase in oil production.
“Oil producers are going to produce less at a lower price, not more,” De Haan said. “I wouldn’t look for any oil companies to magically start increasing production the lower oil prices go. It’s simply a backwards mindset.”
The Energy Information Administration released its short-term energy outlook earlier this week. It predicted that there will likely be less oil demand growth this year due to the trade war and OPEC+ plans.
“I think we are going to see an [oil] output drop this year,” said Gregory Brew, senior analyst at Eurasia Group covering oil markets. He added that as long as there is instability in the U.S. economy and an escalating trade war, there will “absolutely” be a drop in U.S. output.
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Wright was speaking to Bloomberg from Abu Dhabi, United Arab Emirates, where he is meeting with public officials and energy industry stakeholders in the region.
Brew noted that the Trump administration is seeking to have better relations with the Gulf States and Saudi Arabia, adding that “if that involves or includes even passive acknowledgment that U.S. companies are going to lose market to OPEC producers, then perhaps that’s something the administration is fine with if it means they get low prices.”
