Trump vows to tap America’s ‘liquid gold’ oil reserves and ‘drill baby, drill’—the only problem is, it’s not up to him

• President Trump wants to tap America’s oil reserves to boost the economy during his term—but industry shareholders care about their dividends, not his popularity. Also, the economics of oil exploration and production aren’t simple and are unlikely to be swayed by short-term political policy.

Donald Trump is planning to revitalize America’s economy by digging deep. Literally.

In his inauguration speech President Trump told attendees: “We have something that no other manufacturing nation will ever have—the largest amount of oil and gas of any country on earth, and we are going to use it.

“We will be a rich nation again and it is that liquid gold under our feet that will help to do it.”

According to research and experts in the field, however, it’s not technically accurate to say the U.S. has the largest oil and gas reserves on the planet—nor can the Commander-in-Chief guarantee it will be drilled.

After all, unless President Trump is planning a radical overhaul of his nation’s energy industry the decision to “drill baby, drill” isn’t his call.

In reality it’s up to the shareholders of the private entities that run the sector. And unless it’s economically viable for them, they’re under no obligation to increase production.

The question is, what will President Trump do to motivate them into upping the ante?

How much oil does America produce?

When President Trump talks of the ‘amount’ of natural resources America is home to, he may be referring to production.

On this count it would be correct to say the U.S. produces the most oil and gas compared to any nation on earth—and has done so for the majority of the past decade.

But looking ahead, the industry has been readying itself for a plateau in production growth as reserves become exhausted and opportunities for new digging sites dwindle.

So, after an era of extreme investment in new technologies like fracking, the focus is now on returning value to shareholders and preserving resources for the longer term.

Shareholder returns and resource preservation aren’t priorities shareholders will relinquish out of patriotic spirit alone, said Matthew Bernstein, a senior analyst of upstream research at energy intelligence company Rystad Energy.

“The sentiment in the industry … is pretty much completely politically agnostic,” Bernstein told Fortune. “The sentiment in terms of what we’re expecting when budgets are released—and based off of what was delivered at the end of last year—is: ‘We’re sticking with our corporate strategy.'”

That strategy is a focus on shareholder returns, moderate growth and capital discipline, he added.

“Basically: ‘We’ll take the favorable rhetoric out of Washington, we certainly appreciate that there’s an unabashedly pro-oil and gas administration in the White House’, but that it’s really not going to affect their plans versus what it would have been a couple months ago,” Bernstein added.

There is an outside chance that an industry-friendly administration could tempt shareholders into bringing forward capital expenditures penciled in for the next two decades and rescheduling them within the next five.

“The opportunity maybe is to take some of those future volumes in the 2030s and the 2040s and … bring them a little bit forward,” said Robert Clarke, vice president of upstream research at energy analytics and data specialists WoodMac.

“Would it be enough where the U.S. goes back to growing a million barrels a day, year on year? That was sort of the high number people referenced … You don’t necessarily see that happening.

“But just because you won’t have these huge growth numbers doesn’t mean that you can’t have some growth numbers,” Clarke added. “The broader question is are there policy things that can be done? Are there incentives that can be put out there where you take some of that investment that’s probably in supply models for the 2030s and get it into the late half of the 2020s?”

How much oil has America got?

In the long term, other nations have the potential to uncover reserves greater than those of Uncle Sam.

According to Rystad, as of Jan. 1, 2024, the U.S. had proven oil reserves totaling 32 billion barrels. In proven and probable oil reserves, Rystad’s estimate for the U.S. sits at 44 billion recoverable barrels.

Factoring in all potential for U.S. oil production—between proven and probable sites, as well as contingent resources made in new discoveries—Rystad puts the figure at 156 billion barrels.

Conversely, Saudi Arabia’s 106 billion barrels worth of proven oil reserves, probable and proven, sits at 177 billion, and all potential production sits at 247 billion barrels.

For Russia, the figures sit at 58 billion, 93 billion, and 143 billion barrels, respectively.

What’s it worth?

In 2023—the most recent year of data available from the U.S. Energy Information Administration—the first purchase price of a barrel of American oil was a little over $76.

Even compared to 20 years ago, this is a massive rise—during 2003, the price sat at an average of $27.56.

The value of America’s oil reserves has, therefore, increased exponentially in the 21st century, begging the question of why producers—be it major players like Exxon Mobil or smaller outfits—wouldn’t cash in while the going is good.

The problem is twofold. First, if supply floods the market, this will push prices down and thus impact margins, and second, the economics of oil production are not straightforward.

That’s why raising production is a tough sell to shareholders, as WoodMac’s Clarke explains: “One of the things that oil companies are wrestling with is that there’s a bit of a bubbling up asking for people to produce more, but then there’s also some sort of rhetoric floating around about a goal of lower oil prices.”

Within the industry, the sentiment is clear: Companies are beholden to their shareholders, not the White House.

What does Trump need to do?

Conveniently for President Trump, the White House could employ a couple of tricks to make drilling more economically attractive to shareholders.

More minor incentives might include changes to tax codes to offset reinvestment or axing permitting red tape for smaller changes to existing wells.

The most attention-grabbing incentive would be if more federal land were opened for drilling.

“There are some parts of federal acreage that is really competitive,” explained Clarke. “So if the infrastructure was a bit better there, would an E&P [exploration and production company] put a rig there instead of somewhere else? It can shift the cost curve a little to the point of where they drill as opposed to how much they drill.”

Even then, Bernstein argues, companies would effectively be “cannibalizing” from other areas of their portfolio. He explained: “In terms of total implications, it would really be an offsetting effect where you would get some activity being brought there if operators care to do so, but it would come at the expense of other acreage.”

Is Trump’s plan realistic?

Even President Trump’s best offer is unlikely to truly shift the scales for an industry that wants to survive in the long term.

Bernstein says the White House’s plan seems unrealistic, adding: “When you’re considering this as an investment decision, you’re not just making for next year, next quarter, but for the long run.

“The question becomes how are you able to position your business in a way that you can do this—not just next quarter—but you can keep the same value proposition 10, 20, 30 years from now?”

Clarke is similarly realistic but said hypothetically, if these proposals came to fruition, then they could contribute in aggregate to America’s production profile changing.

In turn, this would present an outcome where growth doesn’t flatten at the end of the decade, and this development is instead pushed out into the future.

“We’re going to hit this plateau,” Clarke said. “So, how do other countries respond? What is the U.S. energy sector and how is it viewed? Is it rebranded if there’s enough additional activity from the 2030s brought forward to where that expectation for the plateau gets pushed down the line?

“Markets are always looking for reflection points, they’re always looking for growth to turn into decline.

“That could be the biggest shift coming out of all this, is if that that narrative of the U.S. plateau either goes away or gets pushed further into the future where it loses a bit of credibility.”

This story was originally featured on Fortune.com