Under the Biden administration, US oil production is already at record levels, and while the rate of growth in production has been slowing, output is expected to be even higher next year.

The US Energy Information Administration said earlier this month that it expects US oil production to average 13.22 million barrels a day this year and increase to 13.53 million barrels a day next year. The sector produced an average of 11.3 million barrels a day in Trump’s last year in office.

The challenge for Trump’s new energy team is that global demand for oil has weakened, even as supply – particularly from the US, Canada, Guyana and Brazil – has increased.

The challenge for Trump’s new energy team is that global demand for oil has weakened, even as supply – particularly from the US, Canada, Guyana and Brazil – has increased.

The International Energy Agency has forecast a surplus of supply over demand of a million barrels a day next year, with non-OPEC producers alone adding 1.5 million barrels a day but demand only rising by 990,000 barrels a day.

That surplus would occur even if the OPEC+ producers, led by Saudi Arabia, decide not to start unwinding 2.21 million barrels a day of the 6 million or so barrels a day they have taken out of the market since they started trying to put a floor under oil prices in 2021.

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They had planned to start returning 180,000 barrels a day to the market in October but pushed the start date back to next month.

Despite the production cuts, oil prices have fallen as the year has progressed, driven by weakening demand from China, where oil consumption has declined for the past six months. The slower growth rate of its economy and its remarkable rate of take-up of electric vehicles are unlikely to be temporary phenomena.

With the big OPEC+ production cuts overhanging the market, China’s demand is likely to remain subdued and global growth also muted; a big surge in US production would only depress oil prices further and deter new production.

US shale oil producers – because their wells tend to be short-lived, and the sector is capital intensive – are quick to drill when prices are high but equally quick to dial down their drilling when prices fall.

The external environment could get worse. The US industry is nervous about Trump’s proposed tariffs, particularly tariffs on steel imports, which could drive up input costs and lower global growth – particularly if America’s trade partners retaliate – even as oil prices are under pressure.

The prospect of higher US interest rates and, after the initial boost from his tax cuts wears off, lower economic growth from Trump’s economic policies would also be a concern.

The reality of the US industry is that it could, if it wanted, produce more oil and gas today, but its output is tempered by the subdued oil prices and the knowledge that some of the production OPEC+ has withdrawn from the market could return if the cartel wants to arrest the erosion of its market share.

A wild card for the market is the prospect that Trump will reimpose the sanctions on Iran that Biden lifted, impacting the 1.8 million barrels of oil a day it has been exporting.

However, Iran’s major export customer is China, which isn’t deterred by sanctions as shown by its imports of Russian oil. And like Russia, Iran has built a shadow fleet of tankers to transport its oil and circumvent sanctions.

One of Wright’s responsibilities will be regulating and licensing LNG exports. The Biden administration froze the issuance of licences for new LNG export terminals.

The Trump administration could be expected to green-flag them while reducing environmental standards and creating easier and quicker approval processes for new pipelines, which would aid both the gas and oil sectors.

With a lot of new LNG capacity outside the US due into the market by the end of this decade, however, there should be some supply-demand discipline to moderate the growth in American LNG exports.

For both oil and gas, while Trump might withdraw the US from the Paris Agreement on climate change and reverse Biden’s shift towards decarbonising the US economy, much of the rest of the world, including China and Europe, will continue to lower their own use of fossil fuels.

The longer-term outlook for oil and gas and carbon-intensive exports more broadly isn’t positive.

Trump might have appointed people to the key energy administration posts who will cut regulation, open up more federal lands for fossil fuel production and promote more oil and gas production and investment in the infrastructure to get it to markets.

What neither he nor they can do, however, is control the global demand for oil and LNG, and therefore the prices for the fossil fuels and the economics of US production – although Trump’s economic and trade agenda, which threatens to lift the US inflation rate and reduce global growth, might play a role in further reducing that demand.

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