When he was elected, President Donald Trump promised that he’d achieve American energy dominance by rolling back regulations on oil and gas extraction, thereby bringing jobs and prosperity back to the then-busted energy communities of the West.
Now, two years into his tenure, it appears superficially as if he’s delivered on his promises. A flurry of environmental protections have been rescinded successfully, though some attempts have been stymied by the courts. U.S. crude oil production is higher than it’s ever been. And national media outlets have suggested that Trump’s rollbacks have rescued the energy economy from Obama’s stifling regulations: “Driven by Trump Policy Changes,” a recent New York Times Magazine header reads, “Fracking Booms on Public Lands.”
But a deeper look at the statistics reveal that while drilling has ticked back up since 2016, the current oil and gas “boom” remains a mere shadow of the frenzy that occurred under Obama’s reputedly burdensome policies, and the recent comeback has very little to do with Trump’s rollbacks. It’s a matter of correlation rather than causation.
Something that often gets lost amongst the thicket of rhetoric around energy independence and dominance, fracking booms and environmental policy, is the fact that oil and gas, like all marketable commodities, generally follow laws of supply and demand. As demand rises relative to supply, so do prices. And as prices increase, producers drill more wells, which is the most expensive, labor-intensive, and arguably the most disruptive and destructive phase of hydrocarbon production.
An oil and gas boom is really a surge in drilling, not production (though the former ultimately leads to the latter). If prices crash, drilling slows, jobs are lost, the oil patch quiets a bit but production continues from existing wells. This is why the rig count — not production figures, amount of leased acreage or even the number drilling permits issued — is typically considered the best metric for gauging the health of the industry, and the harm it’s doing. Rig counts faithfully follow the price of oil and gas — if prices go up, the rig count will too, without fail.
So in order to spark an oil and gas boom, Trump would need to induce demand for oil or natural gas, thereby upping prices. Rolling back regulations on leasing and drilling doesn’t do this — at least not directly. People aren’t going to drive more and guzzle more gas just because drilling permits are easier to acquire or some oil company in New Mexico has carte blanche to vent millions of cubic feet of methane into the atmosphere, or a Wyoming producer can run roughshod over sage grouse habitat. The same goes for the corollary: Upping environmental protections on America’s public lands will not significantly affect global oil prices or tamp down demand.
Regulations might affect the rig count negligibly, but only if they significantly drive up costs for the producers and the oil price is at or near the breakeven point, or the price at which drilling a new well — at a cost of $5 million to $20 million a pop — pencils out. A rule limiting methane emissions, for example, might increase a producer’s cost per barrel of oil by a dollar or two, just as shipping oil by pipeline rather than rail might save a producer several dollars per barrel. If oil prices are at the breakeven point, then this difference might be enough to make or break a new drilling project. But if prices are significantly higher or lower than the breakeven price for any given geography and producer, then a few bucks per barrel isn’t going to affect rig counts.
No matter what the rig count or the price of oil is, however, environmental protections and their evisceration certainly do make a difference in the realms that really matter. Obama’s rules limiting methane and other emissions from oil and gas production would have kept millions of tons of climate-changing greenhouse gases out of the atmosphere. Trump dismantled them. The Migratory Bird Act has long punished oil companies when birds get mired down in uncovered toxic waste pits. Trump eviscerated that provision. The current administration has axed or is attempting to roll back master leasing plans, regulations on hydraulic fracturing, protections on the imperiled sage grouse, and has diminished public input on oil and gas leases. It has cut taxes on the richest of the rich — a multi-million dollar giveaway to the global corporations that are drilling America’s public lands.
And yet there is little indication that any of this has caused an uptick in drilling, or has created an abundance of new jobs in the energy fields. Instead, the savings realized by the companies pad the pockets of their CEOs — like the $13.4 million salary for BP’s Bob Dudley. Rig counts and oil field employment are higher now than they were two years ago, sure, but the recovery began months before Trump was elected, and the numbers are still far below the record highs of 2014, under the relatively restrictive Obama regime.
That’s because price, not policy, drive oil and gas booms and busts. And that puts Trump in an awkward position now as oil prices once again take a dive. On the one hand, he wants his constituents to be able to guzzle cheap gasoline, and he actually berated Saudi Arabia — to whom he has pandered recklessly on other issues, such as killing journalists — for planned production cuts. On the other hand, he has promised the energy workers that voted for him more jobs. He can’t have both, no matter how much he ravages the environment.
Jonathan P. Thompson is a contributing editor at High Country News and the author of River of Lost Souls: The Science, Politics, and Greed Behind the Gold King Mine Disaster. Get a copy of River of Lost Souls.
“(Thompson) combines science, law, metallurgy, water pollution, bar fights and the occasional murder into one of the best books written about the Southwest in years.”
— Andrew Gulliford, historian and writer, in The Gulch magazine.