U.S. Oil Producers Hope ＂Big and Beautiful＂ Bill Will Lower Costs

Recently, the U.S. Trump administration released a series of policies, including the "Big and Beautiful" Act, to enhance the competitiveness of American crude oil in global markets. Currently, U.S. oil producers are expecting these measures to help reduce their break-even costs, especially amid the Trump administration's push to lower oil prices.

At the beginning of July this year, the U.S. "Big and Beautiful" Act officially took effect. The act reduces the royalty rate for oil and gas extraction from 18.75% to 12.5% and introduces a new "expedited review process" under the National Environmental Policy Act, allowing developers to pay fees to accelerate environmental assessments for pending projects. The act also requires the Department of the Interior to approve applications for combined production from two or more sources on federal and non-federal lands and waters. This means operators can jointly produce from multiple reservoirs with significantly different pressure levels as long as specific safety conditions are met.

Andrew Byrne, analyst at S&P Global Commodity Insights, pointed out that the most direct impact of the act for U.S. producers is reduced cash taxes, which will improve corporate balance sheets. Byrne said: "In second-quarter earnings calls, what entrepreneurs talked about most was the impact of the 'Big and Beautiful' Act—specifically how it will lower cash taxes. It definitely helps, but the effect won't be dramatic—expected savings are around $1 to $2 per barrel of oil equivalent. The federal government could also help certain natural gas pipelines and other infrastructure projects pass regulatory reviews, which would boost economic efficiency and stimulate market demand."

According to data from S&P Global Commodity Insights, the weighted average break-even price for U.S. crude oil in 2025 is $54.09 per barrel of West Texas Intermediate (WTI). If accounting for returning 30% of cash flow to investors, the marginal break-even price rises slightly below $61 per barrel, while in the Wolfcamp region of the Permian Basin, over 80% of crude output has a break-even price below $55 per barrel.

Due to low oil prices, S&P Global Commodity Insights’ latest forecast shows U.S. crude production will decline from 13.5 million barrels per day in September this year to 13.1 million barrels per day by September 2026, not recovering until the end of 2028. Production may rebound earlier only if oil prices rise enough to support high-cost capacity coming online or if break-even costs drop significantly. Therefore, producers are hopeful about deregulation. During second-quarter 2025 earnings calls, they stated that new deregulatory measures would ease balance sheet pressures; some producers also hope these actions can offset current increases in steel and other raw material costs caused by tariff disputes.

Andy O'Brien, CFO of ConocoPhillips, noted during an earnings call on August 7 that the "100% bonus depreciation" provision in the "Big and Beautiful" Act will further alleviate balance sheet pressure for the oil and gas industry. This provision allows companies to fully and rapidly depreciate the cost of new equipment placed into service after January 20, 2025. O'Brien revealed that simply increasing the bonus depreciation rate from 40% to 100% is expected to generate around $500 million in benefits for the company.

Ezra Yacob, CEO of EOG Resources, said during an August 8 call that the act also permanently reinstates the policy allowing 100% deduction of research and experimental expenses, from which the company will benefit. Yacob stated the act is expected to bring EOG Resources approximately $200 million in benefits in 2025, with similar annual gains continuing in future years.

James Walter, co-CEO of Permian Resources, said on August 8 that the tax provisions in the act will incentivize increased investment in domestic U.S. shale oil production and reduce the company’s tax burden over the coming years. "We expect cash taxes in 2025 to be less than $5 million, and cumulative cash taxes from 2026 to 2027 to total less than $50 million. Benefits from tax and regulatory reforms will help offset potential minor increases in steel and other raw material costs that tariff disputes might impose on our operations," Walter said.