When Trump took office back in January, he vowed to support renewed production by the oil and gas industry. His executive orders during the first days of his administration sought to encourage additional exploration for oil and gas within the country while also stifling renewable energy. However, the events unfolding since those initial days in office are having the effect of alienating the very sector he promised to support.
When the president announced his “Liberation Day” tariffs, the stocks of oil drillers took a major hit and approximately $280 billion in stock value was wiped off their books during the month of April. Major entities like Chevron and Exxon Mobil lost 18% and 11% of the value of their stocks, respectively.
To compound matters, prices of crude oil have tumbled to about $60 per barrel in May. In January, each barrel cost approximately $80. This steep drop has caused oil companies to falter in their plans to produce more oil since there is uncertainty that investments aimed at ramping up production will pay off. A survey conducted on major investment banks like Morgan Stanley, Goldman Sachs and JPMorgan suggests that the price of crude could hover around $64.6 per barrel throughout this year. This is in contrast to estimates that put the breakeven point of many American crude oil producers at approximately $62 per barrel.
If those price forecasts and breakeven points are anything to go by, it becomes clear why U.S. oil and gas firms aren’t feeling Trump’s call of “drill, baby, drill!”
Additional headwinds are materializing as a direct result of the tariffs imposed. The back and forth positions of the president characterized by steep tariff announcements followed shortly after by announcements that the implementation has been paused are spreading uncertainty throughout the oil and gas industry.
While a pause to allow for negotiations to happen isn’t in itself a bad thing, it has a negative impact of keeping industry players on edge because they don’t know how the talks will conclude. Additionally, practical questions arise, such as how effectively and quickly the U.S. can conduct talks with more than 100 countries simultaneously. There is an air of gloom regarding the prospects of the tariff situation being resolved expeditiously, let alone favorably.
The unpredictable nature of Trump regarding trade policy has industry actors worried, and this state of affairs isn’t conducive to capital investment and production increases. Even companies like GEMXX Corp. (OTC: GEMZ) with oil and gas operations in Latin America are most likely also feeling the impacts of Trump’s oscillating and erratic policy announcements because the trade war he started shook global supply chains.
NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ
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