As 2025 draws to a close, the U.S. oil and gas sector stands at an intriguing crossroads, shaped by a whirlwind of policy shifts, technological leaps, and global market forces. The numbers tell a story of contradictions: drilling activity is down, yet oil production is up, and prices at the pump have fallen to levels not seen in years. All of this is happening under the watchful eye—and heavy hand—of President Donald Trump, whose administration has made energy independence and deregulation a central pillar of its economic agenda.
According to recent government jobs data reported by Kudlow, the American economy is undergoing a significant restructuring. Federal jobs have dropped by roughly 270,000 in 2025, while private sector jobs have surged nearly 700,000. In a striking demographic twist, native-born jobs are up by about 2.7 million, while foreign-born jobs have declined by almost a million this year. Unemployment has ticked up, largely as former federal workers seek new opportunities, but there’s a bright spot for many: wages for middle-class workers have risen about 5% year-on-year—double the current rate of inflation.
But perhaps the most immediate impact felt by Americans is at the gas station. West Texas Crude oil prices have plummeted from $80 a barrel at the start of 2025 to just $55 by mid-December, a decline that’s sent gasoline prices nationwide below $3 per gallon. Oklahoma drivers are paying as little as $2.30, while California’s stricter climate regulations keep prices at a steeper $4.35. As Kudlow points out, the drop in oil prices is expected to push inflation indexes down in the coming months, potentially paving the way for lower interest rates as well.
What’s behind this dramatic shift? The answer is a mix of aggressive policy moves, evolving market dynamics, and a technological revolution in oil production. President Trump’s approach—summed up in the rallying cry “drill, baby, drill”—has been to slash regulations, speed up permitting, and shower fossil fuel companies with federal tax breaks. On his first day in office in January 2025, Trump declared a national energy emergency and signed the ‘Unleashing American Energy’ executive order, which directed agencies to “suspend, revise, or rescind all agency actions identified as unduly burdensome” on domestic oil and gas operations, according to Offshore Technology.
By April, the Department of the Interior had unveiled emergency permitting procedures that cut approval timelines for oil and gas projects to just 28 days—a process that previously could take years. Trump’s ‘One Big Beautiful Bill’ provided billions in new federal tax breaks for fossil fuel companies, and set the stage for 30 offshore lease auctions in the Gulf of Mexico over the next 15 years, plus six more in Alaska’s Cook Inlet through 2032. Meanwhile, the administration pulled $679 million in funding from 12 offshore wind projects, with Transportation Secretary Sean Duffy stating, “Thanks to President Trump, we are prioritising real infrastructure improvements over fantasy wind projects that cost much and offer little.”
Despite these efforts to turbocharge domestic drilling, the market’s response has been more complicated. Data from Baker Hughes shows that the U.S. oil rig count stood at 544 on November 26, 2025—a drop of 38 rigs from the previous year. Oil rigs specifically fell 15% from 477 to 407. Yet, paradoxically, U.S. crude oil production hit a record high of 13.84 million barrels per day in September, up from 13.171 million a year prior. As the U.S. Energy Information Administration (EIA) explained to Offshore Technology, “the traditional link between rig activity and output has weakened recently, with production at record highs despite reduced rig counts.”
This apparent contradiction is largely the result of surging productivity. Improvements in drilling efficiency—such as the use of longer laterals in the Permian Basin, where the average length is now 58% greater than in 2015—and the adoption of advanced technologies like electric hydraulic fracturing and artificial intelligence have enabled producers to extract more oil with fewer rigs. According to the American Petroleum Institute, over half of the wells completed in 2025 featured laterals exceeding 10,500 feet, with the longest stretching an astonishing four miles. Electric hydraulic fracking, which uses electric motors instead of diesel engines, increases efficiency while reducing emissions and noise. AI is now sifting through seismic and geological data to pinpoint the most productive drilling spots, further boosting output.
Cinnamon Edralin, Americas research director at Westwood Energy, notes that “improved drilling efficiencies have greatly reduced the amount of time needed to drill a well, resulting in fewer rigs needed. Enhanced oil recovery techniques mean more hydrocarbons are being extracted than in the past.” The EIA adds that “AI offers increased efficiency by sifting through seismic, historical and geologic data to better identify high-productivity patches.”
Yet, even as productivity soars, market confidence remains shaky. As Professor Robert Kaufmann of Boston University told Offshore Technology, “Any kind of uncertainty increases the real option value of keeping the oil in the ground, which would tend to slow drilling.” Trump’s tariff and trade policies have injected additional uncertainty, with GlobalData analysts noting that tariff tensions and surprise production hikes have kept oil prices from stabilizing above $70 per barrel in 2025. Compounding matters, OPEC raised output targets by about 2.9 million barrels per day in April, contributing to an oil glut and further depressing prices.
The shift in drilling activity is also visible in the types of wells and rigs being used. In the Gulf of Mexico, deepwater drilling now dominates, with the average contracted rig count in 2025 at just 22—down from 112 two decades ago. Of these, 19 are drill-ships, reflecting a move away from shallow water and semi-submersibles. Across the lower 48 states, 2,655 new wells were drilled in the third quarter of 2025, a drop from 2,743 in the same period the year before. The Permian region, a perennial powerhouse, saw 1,278 new wells in Q3 2025, down from 1,380 the previous year, yet it’s forecast to increase crude oil production even as the number of new wells declines.
Looking ahead, the EIA forecasts that U.S. crude oil production will average 13.4 million barrels per day in 2025, dip slightly in 2026, and then climb to 14 million barrels per day in 2027 as new projects come online. Edralin expects the number of rigs under committed utilization to rise in 2026 as companies line up drilling projects for 2027, though the number of rigs actually under contract will remain subdued in the near term.
For everyday Americans, the upshot is clear: lower oil prices are translating into cheaper gasoline and, potentially, lower inflation and interest rates. For the industry, however, the future is less certain. The old metrics—rig counts and well numbers—no longer tell the whole story. Instead, productivity, efficiency, and the ability to navigate a volatile policy landscape are now the keys to success. As the U.S. barrels toward 2026, the only certainty is that the energy sector’s contradictions are far from resolved.
