President Trump’s promise during last year’s election to make it far easier to drill for oil and gas thrilled energy executives who believed his policies would lower their costs and help them make a lot more money.
Those hopes are now fading. Thanks to Mr. Trump’s tariffs, the oil and gas industry is contending with rising prices for essential materials like steel pipes used to line new wells.
That has not yet translated into a meaningful change in U.S. drilling activity or production expectations, but companies have begun revising budgets to reflect higher materials costs. Decisions made today about which wells to drill will affect production many months from now.
Oil refineries are separately bracing for a tariff on Canadian oil, which some of them need to produce gasoline, diesel and other fuels.
At the same time, consumers have grown jittery about the economy and the price of oil has fallen about 10 percent since just before Mr. Trump took office, to around $70 a barrel. Oil companies tend to drill less when prices fall.
The combination could complicate Mr. Trump’s stated desire to juice U.S. oil and natural gas production, which is already at or near record highs.
“Our ability to ‘drill, baby, drill’ is directly tied to the economics of the well,” said Lori Blong, the mayor of Midland, Texas, which is at the heart of the most prolific U.S. oil basin. “We can’t drill ourselves into a bind.”
A planned 25 percent tariff on imported steel, set to take effect March 12, is very consequential to U.S. oil and gas producers, whose wells often stretch miles into the earth. The steel pipe that they use to line those holes can account for 10 percent of the total well cost.
Mr. Trump said in early February that he would impose tariffs on steel and aluminum. The price of steel pipe was already rising before that announcement and has climbed since.
The steel pipe used in wells was 10 percent more expensive on average in February than it was in October, according to an Argus Media price index that reflects domestic and imported products. The kind of pipe used to move oil and gas around the country also costs more than it did last fall. Both products remain less expensive than they were coming out of the pandemic, when supply-chain disruptions sent prices soaring across the economy.
Elevation Resources, a private oil and gas producer in West Texas, is among those facing a big jump in costs. As of late February, the company was expecting to pay around 30 percent more for the pipe it uses to line wells, partly because a less expensive variety is no longer available.
“When Trump announced the tariffs, a switch flipped on availability and pricing,” said Steve Pruett, Elevation’s chief executive.
That has not yet caused Elevation to change its drilling plans for this year, but “it’s a zero-sum game,” Mr. Pruett said. “If you have a fixed budget and the wells cost more, then you’re going to drill fewer wells.”
The United States is also scheduled, on Tuesday, to begin charging tariffs on energy imported from Canada and Mexico, threatening oil refineries — and potentially causing prices at the pump to rise. Those levies were originally set to take effect in early February, but Mr. Trump put them off for a month.
The White House did not respond to a request for comment. Mr. Trump has downplayed concerns about the potential economic risks of tariffs, saying the benefits “will all be worth the price that must be paid.”
Mr. Trump’s term is just a month old, and the full effects of his policies will become clearer over the coming months and years. The cost of materials is one of many variables that determine how profitable oil companies are. Overall, rates for drilling and fracking have fallen because companies have become more efficient. Oil prices could also swing based on geopolitical developments, including a peace deal between Russia and Ukraine, which Mr. Trump is pushing for.
The Trump administration has already helped the oil and gas industry in some ways. In February, the Army Corps of Engineers moved to accelerate permitting for oil and gas projects. The Energy Department signed off on a proposed natural-gas export facility on the Gulf Coast that had been waiting for a green light for several years. President Joseph R. Biden Jr. paused gas export permitting in January 2024, a move that appealed to environmental groups but upset oil and gas companies.
Natural gas prices have also been much higher than they were this time last year, in part because it has been quite cold in many parts of the country, making some executives optimistic that it will become more profitable to produce the fuel.
Still, in energy, as in other parts of the economy, executives say they are confronting significant uncertainty because it is so hard to predict Mr. Trump’s actions.
“What do you react to? Which direction do you go? That’s part of the dilemma,” said Taylor Potts, a West Texas-based sales manager for B&L Pipeco Services, which stocks and distributes steel pipe to oil and gas companies. “You don’t know if next week all bets are off.”
The early effects of tariff-related price increases are being felt unevenly.
Liberty Energy, which fracks wells for many large U.S. oil companies, has not yet seen tariffs affect its customers’ production plans, said Ron Gusek, Liberty’s chief executive. Fracking involves shooting sand, water and chemicals into wells at high pressure to unlock oil and natural gas. Mr. Gusek’s predecessor, Chris Wright, is Mr. Trump’s energy secretary.
“My guess is you’ll hear a different story depending on the scale of the operator,” Mr. Gusek said while en route to visit wells that Liberty was fracking outside Denver.
If tariffs cause costs to rise further, oil and gas producers are more likely to scale back drilling and fracking activity than they are to spend more, Mr. Gusek said. “They will ultimately spend the same amount of dollars,” he said. “It may end up that they accomplish less work as a result.”
That’s partly because investors want oil and gas companies to operate conservatively.
After Mr. Trump said in February that he would place 25 percent tariffs on steel and aluminum, the chief financial officer of Devon Energy, a larger oil and gas producer based in Oklahoma City, said the company was expecting “less than a 2 percent impact on our overall capital program for the year.”
“We feel pretty good that it’s going to have a minor impact on us at this point,” Jeff Ritenour, the chief financial officer, told analysts in a recent conference call. Mr. Ritenour also said Mr. Trump’s trade policy was a moving target.
On Thursday, Mr. Trump said goods imported from China would be subject to an additional 10 percent tariff, on top of the 10 percent duty that took effect in early February.
There are some signs that oil patch activity may be picking up.
In January, Mark Waters’s oil field supply company in West Texas had its best month in its eight years. Revenue approached $1.3 million, up more than 40 percent from January 2024. Mr. Waters, who said he now planned to expand his staff, attributed that increase in part to business from new companies in the area.
And yet Mr. Waters, who described himself as “a big Trump supporter,” expressed some anxiety.
“We have thrived under Democrats,” Mr. Waters said of the oil business. “You think it would be the opposite because Republicans are so pro-energy. But it’s never really worked out that way in my career.”