When Donald Trump took the presidential oath of office in January 2025, he made his energy agenda unmistakably clear, vowing to unleash American oil production under the rallying cry, “Drill, baby, drill.”
Few could have anticipated how quickly that promise would begin reshaping the energy market, or the unintended consequences that would emerge less than a year later.
Declaring a national energy emergency during his Jan. 20 inaugural address, Trump blamed inflation on “massive overspending and escalating energy prices,” pledging to accelerate domestic drilling and tap what he called the nation’s vast reserves of “liquid gold.”
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Fast forward to mid-December 2025, and oil prices are hovering near $55 a barrel — the lowest level in nearly five years and down roughly 25% year-to-date.
While cheaper oil has delivered relief to consumers, it has also introduced a new problem: at these prices, pumping crude is no longer profitable for a large segment of U.S. producers.
The result is growing concern that parts of the domestic oil industry could be forced to scale back or shut down altogether.
U.S. energy stocks sold off sharply this week as oil slipped to the $55 level, setting off warning signals across Wall Street research desks.
The Energy Select Sector SPDR Fund (NYSE:XLE) tumbled 3% on Tuesday, marking its worst session since late June.
According to a December 2025 survey by the Dallas Federal Reserve, when WTI crude falls below $61 per barrel, most U.S. oil companies struggle to profitably drill new wells.
“Only large independents or oil majors can sustain production levels in a lower price environment,” Johannes Rauball, crude oil analyst at Kpler, told Benzinga.
“The average U.S. breakeven, if everyone is treated equally, is slightly above $60 per barrel, so it does impact quite a few players,” Rauball added.
Smaller private producers are particularly vulnerable, he noted, as they lack the scale and access to advanced technologies that allow larger firms to operate more efficiently at lower prices.
Energy analyst Jeff Krimmel, founder of Krimmel Strategy Group, told Benzinga that while some operators can still turn a profit with oil below $50 per barrel, others face mounting pressure.