Oil’s Houston Homecoming Overshadowed by Trade War, Price Drop
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Oil’s Houston Homecoming Overshadowed by Trade War, Price Drop
Kevin Crowley and David Wethe
5 min read
(Bloomberg) -- Oil executives gathering in Houston this week learned the hard way that US President Donald Trump’s pro-fossil fuel agenda comes with a catch: lower prices.
The CERAWeek by S&P Global conference in the oil capital of the Western Hemisphere was supposed to be a celebratory homecoming for the new administration. In his post-appearance briefing with Trump in the Oval Office, Energy Secretary Chris Wright said attendees were “elated” at the prospect of reversing Joe Biden’s “destructive” climate policies. Interior Secretary Doug Burgum said spirits were “through the roof” with the new focus on growing America’s resource wealth.
But while shale executives, foreign oil ministers and industry experts engaged in panel discussions and coffee klatches, Trump was waging an aggressive trade campaign against Canada in real time. Benchmark oil futures slid to around $65 a barrel amid a wider market sell-off. The American leader called the price drop “phenomenal news.”
But inside the conference venue, oil executives voiced concern.
“When you get below the cost of supply, you can’t ‘drill, baby, drill,’” Harold Hamm, the billionaire co-founder of Continental Resources Inc. and a major Trump donor, told Bloomberg Television. “That shuts you down. Certainly, there are a lot of fields that are getting to the point that’s real tough.”
As a group, oil-industry executives strongly support Trump’s ‘Energy Dominance’ agenda because it promises more access to government-controlled land, easier pipeline permitting, and a gentler tax regime. But the facet of his playbook that makes them bristle is trade policy.
BlackRock Inc. Chief Executive Officer Larry Fink warned of a dangerous economic moment.
“If we are becoming a little more nationalistic — and I’m not saying that’s a bad thing — but it does resonate with me that it’s going to have elevated inflation,” he said. “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.”
Trump’s energy chief, Wright, urged investors to look past Trump’s on-off tariff threats. “You’re seeing the sausage-making up close and personal,” he said in an interview. “You’ve got to give it a little bit of time.”
In the corridors of the Hilton Americas Hotel and the adjacent George R. Brown Convention Center, executives, bankers and policymakers expressed anxiety about uncertainty over tariffs that have thrown a wrench into dealmaking and threaten to balloon costs.
“We’re starting to see some early signs of inflationary forces sitting in the system today,” ConocoPhillips CEO Ryan Lance said. “We have to give the administration a bit of a opportunity to work through this.”
Meanwhile, Canadian officials swerved between bewilderment and exasperation at their biggest trading partner.
“Are we going to have 100% tariffs, 200%?,” said Alberta Energy Minister Brian Jean. “Are we going to lock the border? Why do you do this to your best friend?”
As it stands, the US is in its strongest position vis a vis energy markets in decades. It’s currently the world’s largest oil producer, pumping more on a daily basis than Saudi Arabia and Iraq — OPEC’s biggest producers — combined.
That said, the OPEC+ alliance is moving more crude onto world markets after years of restraint and both ConocoPhillips and Occidental Petroleum Corp. warned that US crude output could be on the cusp of plateauing in a few short years.
“We think that between 2027 and 2030 that it’s likely that the US will see peak production,” Occidental CEO Vicki Hollub said. “After that it’s going to decline.”
The one thing everyone appeared to agree on was that developed-world electricity demand will grow substantially for the first time in many years. The data-center boom has created “mind-boggling” forecasts for power consumption US Federal Energy Regulatory Commission Chairman Mark Christie said, providing a huge opportunity for natural gas as a fuel source.
Liquefied natural gas demand will grow 60% globally by 2040, according to Shell Plc CEO Wael Sawan. “There’s no question that the narrative is changing,” he said. “Gas has a long runway.”
Climate change, a central topic of the conference for the past four years, appeared to be the big loser. Wright called the Biden focus on the environment a “quasi-religious” pursuit that “imposed endless sacrifices on our citizens. Wind and solar were “darlings of the last administration,” he added.
His argument didn’t land as strongly as might be expected among an oil industry audience, attracting only muted applause. Many companies have spent billions on decarbonization efforts and years lobbying for an “all of the above” energy policy that includes renewables.
Wright’s praise for the “women-liberating joys of a washing machine” to make the case that energy is key to alleviating poverty in the Global South raised eyebrows among attendees.
But for now, navigating the volatility kicked up in the wake of Trump’s trade measures is a top agenda item for oil chiefs.
“The president and his team fully recognize to help meet the Energy Dominance agenda you’re going to need a trade agenda that falls within that frame as well,” said Mike Sommers, CEO of the American Petroleum Institute. “We’re confident that we’re going to be able to prevail on the White House.”
