U.S. oil and gas activity saw a modest rise in Q1 2025, but sector executives voiced deepening pessimism over Trump administration tariffs and conflicting energy policies, according to a Dallas Federal Reserve survey released Wednesday. While 130 energy firms reported increased production, concerns over rising costs and policy instability overshadowed gains, with the company outlook index plunging to -4.9 (from +7.1 in Q4 2024) and the uncertainty index surging 21 points to 43.1.
Key Findings:
Tariff-Driven Cost Hikes:
25% steel tariffs imposed in March are estimated to raise drilling costs by 4% per well, squeezing profit margins.
Over 50% of oilfield service firms anticipate reduced demand due to inflated expenses for casing, tubing, and equipment.
One executive noted an immediate 25% cost spike for critical materials, warning of fewer completed wells and stalled projects.
Policy Whiplash:
Executives criticized conflicting goals of “U.S. energy dominance” and $50/barrel oil as contradictory, citing Trump’s dual push for production growth and price suppression.
“The administration’s chaos is a disaster. ‘Drill, baby, drill’ is a myth—tariffs destabilize planning,” one anonymous survey respondent stated.
Sector Strains:
Oilfield service costs grew faster in Q1 than Q4 2024, pressuring margins amid stagnant oil prices.
Executives emphasized needing $75–80/barrel oil to justify new investments—a threshold unmet under current policies.