The founder of Pioneer Natural Resources has a stark warning for U.S. oil producers: the next two years will be challenging, and the days of “drill, baby, drill” are over at $50 per barrel oil.
Scott Sheffield, who founded Pioneer and sold it to ExxonMobil for $60 billion last year, predicts that the U.S. shale industry will need to reinvent itself once again to remain competitive in a market with lower oil prices—a trend that aligns with the Trump administration’s goal to keep oil prices low.
Since the first shale revolution, U.S. producers have proven they can cut costs, improve efficiency, and lower their breakeven prices through boom-and-bust cycles. However, industry executives have warned that this time, a boom driven by high oil prices isn’t on the horizon.
Slower Growth and More Uncertainty
Even before President Trump’s election, growth in the U.S. shale industry was slowing. The uncertainty surrounding global oil supply, economic growth in the U.S. and China, and the potential for lower oil prices in the future have only added to the unpredictability.
If oil prices remain below $60 per barrel and head toward $50—as the White House prefers—U.S. producers could face another round of consolidation, cost-cutting measures, and job reductions to weather the downturn.
The Trump administration’s push to reduce regulations and taxes on oil and gas companies contrasts with the president’s goal of keeping oil prices low to benefit consumers. Additionally, ongoing trade and tariff wars are making it harder for U.S. producers to plan for the future. The uncertainty surrounding tariffs makes it difficult for companies to budget for drilling and capital expenditures.
Advice for U.S. Oil Firms
In an interview with Bloomberg at the CERAWeek by S&P Global conference, Sheffield gave advice to U.S. oil companies: “You’ve really got to hunker down.”
Sheffield recommended that producers focus on their best prospects, even if it means laying off workers. The coming two to three years will be a test for many in the industry.
While Sheffield acknowledges that there’s a chance for companies to survive at $50 oil, he is not optimistic about profits at that price. “It’s really hard to make money at $50 oil,” he said, adding, “That $50 oil is not going to work.”
Rising Costs and Tariffs
Even as some industry leaders, like U.S. Energy Secretary Chris Wright, suggest that shale producers could continue growing even with lower oil prices, Sheffield is concerned about rising costs. Steel and aluminum tariffs, in particular, are increasing the cost of drilling, as U.S. steelmakers raise their prices in response to the tariffs.
Sheffield is hopeful that President Trump’s tariff policies will prove successful but noted, “The President has two years to prove it.”
According to Rystad Energy, U.S. shale and offshore oil and gas projects are expected to see cost increases of 5% to 10% due to tariffs, particularly on steel used in onshore oil and gas facilities. Rising costs and lower oil prices create a challenging environment for drilling activity.
Changing Priorities in U.S. Shale
The priorities of the U.S. shale industry have shifted dramatically since Trump took office. Today, shale producers are focused less on expanding production and more on returning profits to shareholders. The industry has made significant strides in capital discipline and improving efficiency, allowing it to deliver better returns while managing oil price volatility.
However, with ongoing uncertainty surrounding oil supply, demand, and costs, U.S. shale producers will likely face another cycle of consolidation and innovation to stay profitable at lower prices.
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