Policy and Legal

Traditional energy exploration and production in the U.S. declined slightly in the third quarter, as oil and gas executives reported rising concern about tariffs and trade uncertainty—and decreasing optimism about the state of the industry (POLITICO Pro, subscription).

What’s going on: A quarterly survey of oil and gas companies released today by the Federal Reserve Bank of Dallas quotes industry executives who pointed to concerns about various administration policies, from tariffs to energy.

• The survey of 139 energy-firm executives in northern Louisiana, Texas and southern New Mexico found that oil companies were drilling less as the administration’s 15% tariff on imported steel required for oil-and-gas infrastructure continued.
• The survey’s company index also slipped, from -6.4 in Q2 to -17.6.

Why it’s important: “Oil executives told the Dallas Fed earlier this year that Trump’s push to lower fuel prices, which lessens the economic incentive for producers to drill, was incompatible with his stated desire to increase production.”

• Tariffs on many imported goods have increased the cost of drilling “at a time when producers are struggling with an oversupplied market, sluggish demand and weak prices.”

What they’re saying: “Tariffs are increasing our supply costs,” said one oil-and-gas support services firm executive.

• “The administration is pushing for $40 per barrel crude oil, and with tariffs on foreign tubular goods, [input] prices are up, and drilling is going to disappear,” an exploration and production company leader said in his survey response. “The oil industry is once again going to lose valuable employees.”
• Said another: “The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch. Those who can are running for the exits.”