President Trump’s ‘drill, baby, drill’ policy promises to unleash a new boom in U.S. oil and gas production with eased regulations and greater access to export markets.
Yet, U.S. producers will need market forces to align with the now friendly policy to pull America’s natural gas output out of the stagnation last year as a result of multi-year low domestic prices amid record output, warmer weather, and inventories above average.
Higher demand for American gas will boost drilling activity, but it will also push up energy prices and costs for consumers and businesses. Higher costs are the opposite of what President Trump has been promising all year.
Ultimately, the gas markets and prices, both at home and abroad, will determine how much natural gas American producers will pump in the near to medium term.
At the beginning of President Trump’s second term in office, the U.S. and international natural gas markets look supportive of a jump in American gas production with rising demand for LNG and surging domestic power demand, where gas could be the big winner of the AI-driven jump in electricity consumption.
President Trump’s policies are also supportive of the industry, with eased regulation, efforts to accelerate energy infrastructure, the lifting of the pause on LNG export permits, and last but not least – the $500-billion AI initiative, which will begin in Texas.
US Natural Gas Production
U.S. gas producers, many of which had to curtail output last year due to low prices, are preparing to return to growth in drilling activity as additional demand is being created with the AI and data centers and the LNG exports.
Higher LNG exports could also put a floor under U.S. gas prices, making boosting American production profitable for companies.
Last year, U.S. shale gas production, which accounts for 79% of total dry natural gas production, decreased slightly and was on track for the first annual decline in EIA shale output records dating back to 2000. Output in Texas, home to the Permian, grew because gas is associated with oil production. But the Appalachian Basin, where the pure shale gas formations lie, saw a drop in output as the major gas-oriented companies scaled back drilling and deferred completions last year to sit out the low prices.
As a result, U.S. natural gas production in 2024 was slightly lower than in the record year 2023.
This year, the market fundamentals are aligning with President Trump’s ‘drill, baby, drill’ efforts.
LNG Exports Driving U.S. Natural Gas Demand
U.S. natural gas demand will rise with the start-up of additional LNG export plants. The EIA sees LNG exports as the leading source of natural gas demand growth in its latest monthly forecast. Exports of natural gas by pipeline and liquefied natural gas are set to increase by 2.9 Bcf/d in 2025, with most of the increase coming from LNG exports.
U.S. LNG exports are expected to jump by 15% in 2025, reaching almost 14 Bcf/d, thanks to higher export capacity with the Plaquemines LNG and Corpus Christi LNG Stage 3 plants, which achieved first gas at the end of 2024.
Europe’s gas demand could be a boon to U.S. LNG exporters as European gas storage will need to be filled to at least 90% of capacity by November 1, 2025, in anticipation of the 2025/2026 winter.
That’s not even counting President Trump’s “tariffs all the way” threat if Europe doesn’t buy more U.S. oil and gas.
One of the reasons behind the Biden Administration’s now-reversed pause on LNG export approvals was that unrestricted exports would drive up gas prices for consumers in America.
Under President Trump, approvals are expected to be expedited, which would support U.S. gas prices to levels enough for producers to return to growing output.
If production grows too much too fast, again, the market forces of supply and demand will push prices lower.
AI Boom to Boost Natural Gas
Another major driver of the U.S. natural gas growth is the AI boom.
After two decades of flat power consumption, U.S. electricity demand rose by 2% in 2024 and is set to rise at a similar pace this year and next, the EIA says.
The surge in U.S. power demand due to AI advancements and data center construction is set to unleash a new boom in the buildout of natural gas power plants to provide reliable 24/7 electricity.
Big Oil is already proposing to help power the AI revolution and the enormous energy consumption with gas power plants. Chevron and Exxon are talking to power generators, energy providers, and data centers to provide what they describe as lower-carbon energy.
Natural gas-fired power generation in the United States soared to a record high last year, driving up global gas demand. Gas-fired power plants are the single largest source of U.S. power generation, at around 42-43%.
U.S. power-generating companies are announcing plans for the highest volume of new natural gas-fired capacity in years.
With the U.S. Administration now favoring natural gas and moving to accelerate energy infrastructure expansion, gas producers will benefit, and supply to consumers will rise.
Gas demand will be driven by LNG exports, AI centers, and weather, of course.
Supply and demand in the U.S. and global gas markets will be the ultimate drivers of America’s new gas boom or bust.
By Tsvetana Paraskova for Oilprice.com
