The oil and gas industry has always been subject to the winds of change, but today, it's navigating a tariff tornado. Volatility is nothing new; however, the current climate has the global energy sector in a full-blown headspin.
Traditionally, oil prices have swung like a pendulum. Yet in recent months, even seasoned analysts have struggled to define the market as bullish or bearish. Amid this turmoil, one thing is clear: geopolitics and oil remain inseparable.
Within days of reclaiming the Oval Office, President Trump signaled his intent to combat inflation with one primary lever: lowering oil prices. Addressing the World Economic Forum in Davos this January, he openly urged Saudi Arabia and fellow OPEC members to “bring down the cost of oil”.
OPEC+ responded decisively. In April, the Saudi-led bloc announced a production hike of 411,000 barrels per day starting in May - far surpassing the expected 135,000. Reflecting on February's U.S.-Russia peace talks in Saudi Arabia, it's now inconceivable that oil prices weren’t discussed behind closed doors.
For an industry already grappling with the economic fallout of escalating tariffs, the OPEC move was a double whammy. Brent crude crashed to a four-year low, dipping below $60 per barrel. Wood Mackenzie projects oil prices this year will average $7 per barrel lower than in 2024, forecasting a $64 Brent average in 2026. The US Energy Information Administration mirrors this sentiment with its own predictions of lower prices, while the The International Energy Agency has trimmed its global oil demand forecasts for 2025.
While many oil industry executives expected a return to “drill, baby, drill” under the new administration, the opposite has happened. The New York Times summed the current situation up as “wait, baby, wait”. The US shale industry has been particularly shaken. According to the latest Dallas Fed Energy Survey, firms require an average price of $65 per barrel on average to profitably drill new wells.
What’s next?
Despite the turbulence, today's oil and gas companies are more resilient than during the shocks of 2014 or the pandemic five years ago. Still, warning signs are flashing. Lower prices are already tightening spending plans, hinting at potential project delays and a surge in merger and acquisition activity through the remainder of the year.
Sanctions against Iran - a persistent adversary for both the U.S. and Saudi Arabia - are intensifying. Coupled with stricter enforcement of OPEC production quotas, these measures could restrict global supply and stimulate prices.
Rolling with the political punches: the new reality
Ultimately, survival and success in this new era won’t hinge on geopolitics or price charts alone. The oil industry is built on resilience, and it will be the strength and adaptability of individual companies that determine their fate. That resilience extends beyond the physical into how clearly and confidently companies communicate. In a market where investor trust and stakeholder alignment are under constant pressure, strategic communication has become as critical as operational agility. In 2025 and beyond, only the strong will survive and thrive.
