Donald Trump regained the White House with a promise to “drill, baby, drill”. But the biggest obstacle to his oil bonanza increasingly seems to be Trump himself.

His seizure of Venezuelan oil and his desire to push down domestic petrol prices look likely to take a toll on the US energy industry’s bottom line.

Lower oil prices will make drilling less profitable at home. And that will hit just as the president presses the industry to risk billions on an unstable Venezuelan dictatorship.

Fresh from his audacious raid on the South American country, an uncomfortable truth is emerging: that Trump’s attempt for US energy supremacy could be hitting a roadblock in the form of “big oil” itself.

“Trump describes himself as a big friend of the oil and gas industry. And clearly, he’s politically much more aligned with the industry than the Democrats and the Biden administration were,” says Richard Bronze, from market-monitoring firm Energy Aspects.

“But he also really wants low oil prices, and that isn’t good news for producers – particularly higher-cost producers, like most of the US shale industry.”

The potential divergence between the industry’s interests and Trump’s has been on public display over the past week.

Last Friday, Trump met a group of oil bosses in the Oval Office to encourage them to pile back into Venezuela and rebuild the country’s degraded industry, at an estimated initial cost in the tens of billions.

Darren Woods, ExxonMobil’s boss, was in the room. His company has had its assets expropriated twice in Venezuela, leaving him understandably cautious.

He told Trump Venezuela was “uninvestable” without an overhaul of its legal framework and investment protections.

Woods also expressed confidence that the Trump administration could pull this off. But his headline comment was enough to put Trump offside.

“I didn’t like Exxon’s response,” Trump told reporters on Monday. “We have so many that want it, I’d probably be inclined to keep Exxon out.”

Trump may struggle to strong-arm Exxon and others into flooding back into Venezuela, but another source of friction is the president’s attempt to slash petrol prices.

The Republican Party faces midterm congressional elections this year. Pressure is mounting on Trump to get a firm and early foothold on the election’s main battleground: the cost of living.

In the past week, he has pledged to cut interest rates on credit cards and mortgages. But for most American voters, the most in-your-face cost is gasoline – and Trump has long had the petrol pumps in his sights.

He wants to bring the price of West Texas Intermediate (WTI) crude down to around $50 (£37) a barrel, from near $60 now. And with his newfound grip on Venezuela’s oil supplies, he reckons he has the means to do so.

The investment bank Goldman Sachs has estimated that the WTI price could drop to $50 if Venezuelan production, which would head straight into US refineries, increased by a potentially achievable 400,000 barrels a day.

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At $50 a barrel, most producers could still turn a profit on their existing wells. But it would leave the vast majority below their break-even point for drilling any further.

Analysis firm Kpler says a WTI price of $50 would “test the break-evens of larger producers” and “enforce cautious activity for most”. Forecasters from Rystad Energy estimate that onshore US output, excluding Alaska, would drop by 150,000 barrels a day.

Even if the oil price doesn’t sink that low, the US department of energy expects America’s oil industry to produce at least 1pc less crude this year than last.

As WTI prices nosedived last year from more than $76 in early January, a Dallas Federal Reserve quarterly survey showed the sector’s business activity dropping to its lowest level since the Covid-19 crunch.

Some are considering mergers as a way to tough out the hard times. Reuters reported on Thursday that Devon Energy and Coterra Energy were in tie-up talks.

Others may downsize. Bloomberg reported on Friday that billionaire fracking pioneer Harold Hamm would suspend drilling in North Dakota for the first time in 30 years.

Bridget Payne, of Oxford Economics, says Trump is juggling his support for the oil industry with geopolitical, trade and domestic concerns.

“His motives for encouraging oil prices to go down and output to go up are focused beyond what’s best for the oil industry,” she says.

David Oxley, of Capital Economics, also says the inconsistency between what Trump wants and what is good for the industry “is just going to grow and grow”.

“Even if something isn’t an incredibly good commercial prospect, you might be forgiven for thinking, ‘Well, I’m just going to need to show some degree of willingness on this one.’ You don’t want to poke the bear.”

Payne reckons the producers will be able to tough it out, having emerged from the pandemic shake-out tougher and more efficient.

She also says the industry might need to keep expanding production for survival reasons, grabbing market share before the world potentially passes peak oil demand later this decade.

Despite his Venezuelan gambit, Trump may struggle to get prices down to $50. Major producers like Saudi Arabia need a much higher price than that and could cut supply to move prices the other way.

A turbulent period could lie ahead – one very different from what producers have previously experienced or expected.

“One of the reasons the US oil industry has done so well, particularly over the last couple of decades, is because it has a light-touch regulatory environment and a relatively stable one,” says Energy Aspect’s Bronze. “You mess with that at your peril.”

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