Last week, President Donald Trump met with more than a dozen energy executives – his first meeting with oil and gas bigwigs since returning to office in January.
Reuters reports most of those in attendance were members of the American Petroleum Institute’s executive committee. While details of that closed-door meeting are scarce, API president Mike Sommers told Fox Business that discussions included opening up federal lands for drilling and boosting production.
Trump has made U.S. energy dominance a key part of his agenda. Matt Smith, energy analyst for Kpler, spoke with the Texas Standard about how the administration’s energy policies are going, and how they could affect prices.
This transcript has been edited lightly for clarity:
Texas Standard: So, we all know that President Trump is trying to encourage U.S. oil producers to ramp up production. Will that plea work? Is it enough just to say, please, guys, start pumping?
Matt Smith: I don’t think so, no. So it seems unlikely. You know, it’s prices, not policy or presidents, that are ultimately the driver of U.S. oil production.
So if we were to see higher oil prices, that would cause higher production. But a price in the high 60s, where we currently are, is enough to keep us kind of level pegging, but not really increasing.
Well, where do you think the president is wanting the oil prices to go? Because I presume he wants more oil production to drive down those prices and perhaps have an effect long-term on consumers. Isn’t that the strategy?
Yeah, exactly. And so in terms of oil prices, he’s talked about $50 a barrel before, but that seems way too low, right? Because that would cause U.S. production to drop. That would hurt his base, these people that he’s just recently met.
A level of low to high mid 60s may be a more realistic target, but even that is in contrast to like an OPEC, right, who needs a higher price to meet their budgetary needs. And realistically, U.S. producers need a higher prices as well.
But to your point, all of this, the target of lower oil prices, is driven by that goal to lower prices at the pump. It’s a good way for him to lower or keep inflation in check and a way to put savings back in the pocketbooks of the population here.
How does that square with the whole conversation around tariffs, though? I mean, wouldn’t that have the opposite effect, driving up oil prices? I bet he got an earful on that.
Yeah, exactly. So the two things seem very much in contrast, and that’s the key risk, particularly if we were to see tariffs applied on Mexico and Canada, right, because they’re the two leading suppliers of oil to the U.S. That would ultimately work its way into higher prices at the pump if those two got tariffed.
That said, given the delays that we’ve seen in the tariffs being applied in March, you know, we’re looking ahead to early April here, and there’s talk even just today hitting the news wires of much more targeted tariffs. So hopefully, energy will be left off the table this time.
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This is all playing into a kind of a betting game that happens in the futures markets, right? I mean, you start to see how traders are thinking about how this is going to go. And it sounds like, right now, traders are thinking there’s not going to be much of an impact, this presidential push and all the tariff threats.
Right – you see in the prices, the kind of signaling that we’re not going to see these tariffs applied. That said, the uncertainty that the Trump presidency has brought so far is causing a lot of volatility in the market, a lot of uncertainty.
And it’s all almost having a detrimental effect because people can’t plan, because they have no idea what’s going be coming down the pike in the next month or two or three.
Wildcard here: What if we see a resolution in the Ukraine-Russia conflict? What would that do to energy prices? Have you thought about that much?
Yeah. So particularly with natural gas, it would result in higher natural gas flows from Russia back into Europe, which would definitely reduce natural gas prices. And actually, that would end up hurting the U.S. because the U.S. is now a key supplier of natural gas into Europe.
On the oil side, it may not have too much of an influence on prices, but there would be some of those European countries that would be tempted to take that Russian crude or products again. So it would definitely have an impact on both of those commodities.
