Contradictions emerge as Trump demands lower oil prices and higher U.S. production
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Oil markets are in turmoil. Since his inauguration, U.S. President Donald Trump’s sweeping policy changes and rhetoric have created uncertainty, leaving the energy sector scrambling for clarity. Signs of instability are already visible, with Brent crude prices dropping 2.8 per cent last week, ending four consecutive weeks of gains, and West Texas Intermediate (WTI) crude falling 4.1 per cent.
Trump wasted no time implementing his vision for American energy dominance. On his first day in office, he signed an executive order pledging to “unleash America’s affordable and reliable energy and natural resources” by expanding drilling on federal lands and fast-tracking energy projects. Declaring a “national energy emergency,” Trump urged oil majors to ramp up production, saying, “We have more oil and gas than anybody.” Calling fossil fuels “liquid gold under our feet,” his administration is moving swiftly to reinvigorate the industry.
Trump also withdrew the U.S. from the Paris Climate Accord, redirected resources to support fossil fuels, and eliminated subsidies for electric vehicles. In a further rollback of environmental protections, he curtailed the powers of the Environmental Protection Agency, moves that were celebrated by the automotive sector but criticized by environmentalists.
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Adding fuel to the fire, Trump reiterated threats of tariffs on imports from Canada, Mexico, and China. While no immediate tariffs were announced, speculation persists that Canadian crude could face penalties as soon as Feb. 1. This would directly affect Canada, the largest crude exporter to the U.S., and jeopardize energy ties between the two countries.
Trump took an even harder line during his virtual address to the World Economic Forum in Davos on Jan. 23. He claimed the U.S. does not need Canadian imports, including oil, and suggested Canada could avoid tariffs by becoming a U.S. state. “I say, you can always become a state (of the U.S.), and if you’re a state, we won’t have a (trade) deficit; we won’t have to tariff you,” he said. “We do not need Canadian oil,” he emphasized.
But this rhetoric is factually incorrect. Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy, was quick to call out the inaccuracies. “They do need our (Canadian) oil,” he said. “We ship diluted bitumen, so four million barrels a day go to the states; more than two million barrels a day of that is diluted bitumen. It goes to refineries specifically configured to process it, especially in Minneapolis, Chicago, and Wood River.” … “They need the quality of oil we have.”
Analysts also argue that tariffs on Canadian energy exports would raise U.S. gasoline prices and undermine Trump’s push for “energy dominance.”
At Davos, Trump also called on the Organization of Petroleum Countries (OPEC0 members to lower oil prices to force Russia to the negotiating table and end the war in Ukraine. “I’m also going to ask Saudi Arabia and OPEC to bring down the cost of oil,” he said, blaming the Saudi-led cartel for prolonging the conflict. “They should have done it long ago; they (the Saudis and OPEC) are ‘very responsible, to a certain extent,’ for the continuing Russia-Ukraine war.”
Whether OPEC will comply with Trump’s demands remains to be seen, but it is unlikely. Oil-producing nations depend on higher prices to balance their budgets and complying with Trump’s request would strain their alliance with Russia under the OPEC+ framework.
Trump’s high-stakes negotiations have not stopped there. In a call with Saudi Crown Prince Mohammad bin Salman, Trump reportedly pressed for $1 trillion in Saudi investments in the U.S., up from the $600 billion already offered. It remains unclear how such a demand could be met if oil prices fall further as Trump has urged.
Trump’s push for lower oil prices conflicts directly with his ambition for U.S. energy dominance. Warren Patterson, head of commodities strategy for ING Groep NV, pointed out the contradiction: “Lower oil prices would also be an obstacle to significantly increasing U.S. oil production.” At $70 per barrel, U.S. producers are barely breaking even. Lower prices would undercut American supply, which is costlier to produce than oil from other countries.
The energy sector is now caught in the crossfire of Trump’s conflicting priorities. His aggressive push for low oil prices, combined with his demands for increased U.S. production and tariffs on key trading partners, has left the industry grappling with uncertainty. Oil producers need higher prices to survive, while Trump’s policies risk destabilizing markets further.
Trump has opened multiple fronts, leaving oil markets to sort out the chaos. Until there is greater clarity, confusion will continue to dominate the energy landscape.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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