Crude Awakening 🛢️

Donald Trump has always had a soft spot for oil. It is probably his second favorite word after tariffs. On his campaign trail, he branded himself the patron saint of U.S. oil and gas, promising to revive drilling, slash regulations, and make American energy great. 

So it was only fitting that as he concluded his Middle East tour in the United Arab Emirates, Trump received a symbolic farewell gift: a single drop of Murban crude, the UAE’s premium grade oil. 

However, he was disappointed. 

“This is one drop of oil. The highest-quality oil there is on the planet, and they only gave me a drop of it. So, I’m not thrilled,” President Trump said after receiving the gift.

But he is not alone.

That disappointment is now reverberating throughout the United States’ oil industry. The US crude oil prices have tumbled more than 20% since he took office. Despite their initial optimism, Big Oil, which supported Trump and welcomed his return, is now experiencing significant uncertainty.

Case in point: U.S. oil and gas companies lost more than $280 billion in market value after President Trump announced retaliatory tariffs on April 2, 2025.  The energy sector took the hardest hit of any major S&P 500 group.

And if that weren’t enough, U.S. crude prices plunged to $60 a barrel, marking their lowest price since 2021.

In this issue of CrossDock, we take you through the growth of the US oil industry, break down why prices are falling so low, and what it all means for American energy producers.

However, to better understand the current situation, we first need to understand how the United States became an oil superpower, and for that, we have to go back to Pennsylvania in the 1850s.

Oil Rush

On August 27, 1859, Edwin Drake drilled the first successful oil well in Titusville, Pennsylvania. It wasn’t deep — just 69.5 feet — but it was enough. For the first time, oil was drawn from beneath the earth, not skimmed off surface seeps. 

Drake’s well triggered America’s first oil rush.

Titusville turned into a rush town overnight. Hundreds of wells popped up. Drillers, investors, and speculators flooded in, hoping to make quick money. But crude oil is not of much use in its original form. It had to be refined. So the first refineries were built nearby in Pennsylvania.

Enter John D. Rockefeller.

In 1870, he founded Standard Oil, which quickly became a powerful organization that dominated oil production, refining, and transportation in the United States. By the 1880s, Standard Oil controlled 90% of the U.S. refining market. Rockefeller didn’t just refine oil; he set the price. And America witnessed its first oil monopoly.

That monopoly didn’t last long. In 1911, the U.S. Supreme Court broke up Standard Oil into 34 smaller companies, some of which would later become Exxon, Chevron, and Mobil, ending Rockefeller’s grip on the industry.

By the end of the 19th and the beginning of the 20th century, the U.S. was already a global oil powerhouse. A major turning point came in 1901, when the Spindletop oilfield was discovered in Texas. 

According to Historic Discovery of Spindletop Oilfield: Birth of the Modern Petroleum Industry by Robert Wooster and Christine Moor Sanders, Spindletop produced 100,000 barrels a day – a huge number at that time, and Texas quickly became the center of U.S. oil. By 1902, the state was producing 17 million barrels a year.

This momentum continued for decades.

According to the U.S. Energy Information Administration, by 1970, U.S. oil production hit an all-time high of 9.6 million barrels per day. But the cracks were starting to show. Major fields were maturing, and new discoveries were slowing down. The US became dependent on imported oil.

Then came the shock.

OPEC didn’t just make headlines—it took control of global oil pricing.

Through the 1980s and 1990s, U.S. production kept falling. By 2008, according to the United States Energy Information Administration data, America was producing less than 5 million barrels a day. On the other hand, the OPEC countries were producing 32 million barrels per day, nearly six times the capacity of the United States. 

To meet its energy needs, the United States relied on imports for nearly 60% of its oil consumption, much of it sourced from politically unstable regions.

But all was not bleak. The U.S. soon saw light at the end of the tunnel — or more accurately, oil gushing from it.

The new dawn 

The story of America’s modern oil boom was sparked by two technological breakthroughs — hydraulic fracturing, or fracking, and horizontal drilling. These methods allowed producers to unlock oil trapped deep within shale rock, especially in regions like West Texas and North Dakota. Fields that had once been dismissed as unviable suddenly became profitable.

And just like that, the global oil game began changing.

The Permian Basin became the beating heart of the boom. Rigs multiplied. Capital flooded in. Drillers moved fast. By 2015, U.S. oil output had nearly doubled from a decade earlier, reaching close to 10 million barrels a day, according to the U.S. Energy Information Administration.

By 2018, the Permian alone had pumped more than 33 billion barrels of crude and 118 trillion cubic feet of natural gas, accounting for a staggering 20% of total U.S. crude production. What had once been a quiet desert basin was now one of Earth's most prolific oil regions.

And the momentum didn’t stop there.

According to the United States Energy Information Administration, the United States has produced more crude oil than any country at any time in history for six straight years. In August 2024, the U.S. hit a new all-time high: an average of 13.4 million daily barrels. 

Everything seemed to line up for the great American oil story. But beneath the surface, all was not well.

The Oil Messiah 

In a world increasingly conscious of climate change, oil was no longer the hero of the American story — it was the villain that was frowned upon. Production milestones gave way to emissions headlines. The same commodity that powered the 20th century was now being blamed for the crisis of the 21st century.

Even as the U.S. hit record oil production levels under the Biden administration — topping 13 million barrels per day by late 2023 — the growth came with caveats. New drilling didn’t surge the way it had during previous booms. 

The number of active rigs remained below pre-pandemic levels, and new project approvals were subject to a slower, more scrutinized process.

The oil industry now needed a saviour. Someone who would bring oil back to the center of America’s energy strategy. 

And Donald Trump made it clear: he was that man.

He promised to revive Big Oil’s fortunes, pitching himself as the only candidate who truly understood the industry. Once back in office, Trump wasted no time. His rallying cry — “Drill, baby, drill” — was backed by action.

Through a rapid series of executive orders, he reversed permitting delays, reopened previously restricted federal lands, fast-tracked pipeline approvals, and began unwinding parts of Biden-era environmental regulations. 

On the campaign trail, he made two big promises: to bring down gasoline prices and unleash a boom in U.S. oil production.

Right now, only one of those is happening — and it’s not the boom.

Why are oil prices low?

It’s a question that’s catching everyone off guard: how did we go from “Drill, baby, drill” to prices crashing low? 

The short answer: a perfect storm of tariffs, oversupply, demand jitters, and global production politics. Let’s start with the trade war. 

Since early April, President Trump’s tariffs have rattled global markets. Economists warn that they could drag the world into a slowdown, which would mean lower demand for crude oil. 

U.S. oil prices have already dropped 19% in April alone, falling to $58.21 per barrel, the lowest level in over four years. Adjusted for inflation, that’s about $45 in 2015 dollars, a level that triggered a major industry downturn back then.

Currently, West Texas Intermediate crude is trading around $62, just above the average breakeven cost of $60 per barrel, according to a recent Dallas Fed Energy survey. For U.S. producers, that’s uncomfortably close.

When prices fall below breakeven, companies stop investing, cut rigs, and scale back production — and we’re starting to see that unfold.

Diamondback Energy, one of the country’s top shale producers, told investors it will cut spending and drop rigs this year. Other producers are following suit. 

In a letter to shareholders, CEO Travis Stice wrote: “As crude pricing moves lower for a period of time, as it has over the last month, we expect activity to slow and oil production to decline. As a result of these activity cuts, it is likely that U.S. onshore oil production has peaked and will begin to decline this quarter.”

Similarly, the two largest U.S. oil companies recently posted their weakest first-quarter earnings in years. ExxonMobil reported a profit of $7.7 billion for the first three months of the year — a 6% drop compared to the same period last year. 

Chevron was hit even harder, with profits falling by more than a third to $3.5 billion, largely due to lower returns on each barrel of oil produced.

In addition, production in some regions is already slowing. The Permian’s growth has fallen to just 200,000 barrels a day over the past year, far below the 630,000 barrels a day it averaged from 2017 to 2020. In North Dakota’s Bakken and South Texas’ Eagle Ford, production has been flat for years since the COVID pandemic. 

So, with prices falling, you'd think oil producers around the globe would also hit the brakes on drilling.

But not OPEC+.

OPEC+, the group of oil-producing countries led by Saudi Arabia, decided to increase production, just as demand was weakening. OPEC+ announced it will increase production by 411,000 barrels per day in June, matching the same increase that was made in May. 

Surprisingly, these monthly hikes are three times larger than the group initially planned as part of its gradual phaseout of the 2024 voluntary cuts, which involved eight member countries and totaled 2.2 million barrels per day.

This sudden surge in supply also had a big impact on U.S. oil producers and the price. 

So, why has OPEC+ increased its production level despite a sluggish oil market?  Interestingly, OPEC+ did exactly what U.S. President Donald Trump has been asking for: drill, drill, and drill. 

It may seem counterintuitive, but OPEC+ is increasing supply at a time of falling prices to regain market share. As other producers cut back, OPEC+ recognizes an opportunity. If they wait too long, other suppliers could fill the gap and capture demand. By boosting output now, OPEC+ aims to remain competitive and reassert its influence in the global oil market.

What’s next

Tariffs aren’t just hurting demand, but they’re also raising costs for oil producers. Trump’s tariffs on steel have made key materials like drilling pipes, casings, and storage tanks — all essential to energy infrastructure – more expensive. That’s especially painful for smaller shale companies, which don’t have the bargaining power to push those costs onto suppliers.

Unlike the oil giants, these smaller firms also face limited access to capital and operate almost entirely within U.S. shale. That makes them more exposed to price swings and more vulnerable to cost inflation.

For larger companies, shopping time is over—the M&A boom that defined recent years is hitting pause.

Deal activity in the U.S. oil patch has slowed sharply in 2025. Some of the big acquirers are now focusing on integrating past purchases. Others are holding back, citing low oil prices and uncertainty around tariffs.

So, isn’t a price drop a win for average consumers?

At first glance, falling oil prices seem like good news and cheaper gas for consumers.

But this drop isn’t because of a stronger supply or better efficiency. It’s happening because of economic uncertainty, trade disruptions, and lower investment in new oil projects. Prices are low, but for the wrong reasons.

When oil becomes too cheap to produce, companies start cutting back. That means less supply in the future, and possibly higher prices later.

This dip may seem like a win for consumers, but it’s built on shaky ground, not sustainable growth.

This newsletter was written by Shyam Gowtham

Thank you for reading. We’ll see you at the next edition!