Did Trump's Tariff War "Cripple" US Shale Oil Companies? The Largest Oil-Producing Region Is Suffering Devastating Blows!

US shale oil producers are currently facing the most severe threat in years—industry executives warn that the plunge in crude oil prices triggered by the trade war initiated by Trump has pushed some domestic shale oil companies to the brink of collapse.

Market data shows that since Trump announced the "Liberation Day" tariff policy last week, the price of US WTI crude oil futures has fallen by 12%, breaking through the break-even line for most shale producers in Texas and raising concerns that drilling platforms may be forced to idle.

In fact, the recent sell-off in the crude oil market has been exceptionally severe, almost synchronized with the massive stock market turmoil triggered by Trump's global trade war. Although Trump announced on Wednesday a temporary suspension of some tariff hikes, which pushed oil prices slightly higher—WTI crude oil closed at $63 per barrel on Wednesday—the overall price remains well below the year's high and continues to pose a threat to most producers.

OPEC's recent decision to increase production has also sounded the alarm for US shale producers.

Kirk Edwards, president of Latigo Petroleum, an independent producer based in Odessa, Texas, said, "This reminds me of the COVID-19 period," referring to the oil price crash in 2020—when the entire US shale oil industry experienced a wave of bankruptcies. At that time, the oil market also faced the dual threats of declining demand and OPEC's production increase.

"We are facing a double whammy again," Edwards said, "If prices do not rebound in the next two months, a 'devastating event' could occur in the Permian Basin, the world's largest oil-producing region and the engine of the US shale industry."

The Permian Basin mainly refers to the large sedimentary basin in western Texas and southeastern New Mexico. The region, with its abundant reserves and relatively low extraction costs, has become a focal point for major oil and gas companies.

Bill Smead, chief investment officer of Smead Capital Management, which holds shares in several shale oil companies, also pointed out that the tariff war initiated by Trump has caused "bloody chaos" and may scare away investors in the oil and gas industry.

"Trump wants oil prices to drop to $50, but if that happens, the number of companies in the industry will be halved, which will trigger a wave of mergers and acquisitions, with stronger players swallowing weaker ones," Smead said.

Many analysts also stated that Trump's decision to maintain tariff hikes on China, the world's largest crude oil importer, will continue to suppress global energy demand expectations. Bill Farren-Price of the Oxford Institute for Energy Studies said that many previously stable oil demand growth expectations have now been completely invalidated.

From the current situation of the US shale industry, with oil prices below $60 per barrel, many US oil companies, especially those in older production areas, will face profitability challenges and may be forced to stop drilling, mothball equipment, and lay off workers.

Data from Rystad Energy shows that, after accounting for debt and dividend costs, the WTI crude oil break-even line for most US shale producers is $62 per barrel.