The state of global energy today is riddled with paradoxes – and few exemplify them more than the current US administration. While pledging to boost US oil production with ‘drill, baby, drill’, lower pump prices and impose tariffs on both allies and adversaries, its policies have instead created a tangle of unintended consequences now rippling across global oil and gas markets.

Before returning to office, President Trump vowed to bring down oil prices and restore American energy dominance, declaring an ‘energy emergency’ for which there was scant evidence. In a limited sense, he has succeeded. His trade war and sweeping tariffs has slowed global GDP, is suppressing industrial activity, and pushing up costs across the board – particularly for steel and steel components, a critical input in oil and gas infrastructure. US shale producers, already struggling with cost inflation and tightening capital, are responding by cutting drilling. Rig counts have been falling.

Then came Saudi Arabia’s latest strategic move. Last month, Riyadh announced the revival of 411,000 b/d of production and raised OPEC+ quotas. The additional barrels have further depressed prices – at precisely the moment that US shale is most vulnerable.

Under ‘normal’ times, OPEC’s production (which is generally at a low cost) is constrained, leaving opportunities for higher cost production (for example, oil sands, some deepwater plays and certain unconventionals) to meet the market demand – and set the price. This arrangement tends to suit OPEC members, many of which rely on high prices to fund their government spending programmes.

But equally, OPEC members can exert influence by opening up their valves, bringing on more supply to crash the oil price and drive up their own market share. This is deliberate, as Antoine Halff, Co-Founder and Chief Analyst of earth observation platform Kayrros, notes: ‘For a dominant low-cost player [such as Saudi Arabia], temporary pain is a calculated investment to consolidate market share, punish free riders and deter future rivals.’

This, it seems, is the backdrop for Trump’s visit to the Kingdom of Saudi Arabia earlier this month, which could perhaps have been about solving wars (trade or otherwise). Yet the headlines suggest it was more about trade deals – in defence, aircraft and AI – as part of a broader effort to shore up Gulf business ties and investment.

For consumers, the drop in oil prices is welcome. Prices in the UK are at their lowest since 2021 and help to keep inflation in check. But for US shale (oil) producers, which typically need $55+ per barrel to break even, it’s a serious threat. As Bloomberg Opinion Columnist Javier Blas noted recently, US oil output may soon peak. There are other big shifts in this market: Saudi Aramco has cut its dividend and BP may be on the verge of a takeover.

Before returning to office, President Trump vowed to bring down oil prices and restore American energy dominance, declaring an ‘energy emergency’ for which there was scant evidence. In a limited sense, he has succeeded.

LNG supply risk, cost escalation and demand destruction
The implications for natural gas are equally troubling. Some 37% of US gas production is from so-called ‘associated gas’, a byproduct of oil production, and much of this is from the shale heartlands including the Permian and the Bakken. A significant share of this associated gas (which is in effect produced at zero marginal cost), is exported as LNG (and some of it is flared).

But when upstream oil drilling slows (driven by higher supply costs and/or lower prices of oil), so too does gas supply – putting the foundation of America’s LNG boom at risk. And yet, just a few months back, no one was really expecting a gas supply risk could undermine LNG.

Meanwhile, global LNG markets are shifting rapidly. China, once a top buyer of US LNG, has reduced direct purchases. While Chinese firms continue to acquire gas via the international market, they are increasingly taking delivery from Australia, Qatar and others – quietly rerouting trade flows and reshaping the global balance.

This matters. Many US projects were expected to expand rapidly, driving up global LNG capacity by 40–50% by 2030. Some now look in jeopardy, with a supply glut becoming even more of a significant risk. Weaker supply, uncertain demand, higher costs and long development timelines make industry executives nervous. Some may shelve expansion deals. Nervous buyers may revert to coal (or, with luck, accelerate investment in renewables).

Trump had counted on LNG exports to underpin his energy agenda and generate trade leverage. His administration pressured the EU (as part of his global trade war) to pivot away from Russian gas in favour of US LNG. Yet even this pillar now looks unstable. Europe is increasingly wary of long-term fossil fuel contracts, and is accelerating its energy transition. Trump’s vision of global energy dominance is facing headwinds from all directions.

Amid the chaos, Qatar stands out as the clear beneficiary. With enormous, low-cost reserves and a planned expansion from 77mn to 126mn t/y by 2027, the country, now operating outside of OPEC, is on track to dominate the next LNG wave. The link between this and the gift of a $400mn plane is, however, unclear.

So, what next?
There may also be a geopolitical undercurrent. Russia is a member of OPEC+ and signed up to the recent production increase, despite the fact that lower oil prices weaken its fiscal position at a time when much-needed revenues are partly paying for its war effort. Trump, eyeing a legacy-making peace deal, may quietly welcome that effect. Equally, Trump is pushing for a nuclear enrichment deal with Iran, which if delivered, could result in lifting of sanctions and another 1mn b/d of production, further pressurising prices.

Today’s energy geopolitics are deeply entwined and increasingly contradictory. Low oil prices are demanded, but also a booming oil and gas industry. Peace is the stated goal, yet instability spreads. America talks of energy dominance, but in LNG, the crown may quietly pass to Qatar.

A version of this comment was first published on LinkedIn on 14 May.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.

• Further reading: ‘Fuelling change: the surge of US LNG’. As the start of the 21st century witnessed growing dialogues around climate change and recognition of the need for renewable energy sources, a contrary trend has emerged from the heart of the US: an upsurge in LNG production. This phenomenon not only marks a significant pivot in the US energy narrative, but also casts a long shadow on the global dialogue concerning environmental sustainability and the transition towards greener energy paradigms.
• Europe’s response to the ending of imports of gas from Russia has been to cut consumption and accept new supplies of LNG from the US. Here, Michael Bradshaw, Professor of Global Energy at the Warwick Business School, considers whether these changes are likely to be permanent.