Ten months after President Donald Trump returned to the White House promising a fossil fuel renaissance under the ‘Drill Baby Drill’ mantra, the energy sector he pledged to supercharge is falling behind.
The centerpiece of Trump's campaign was to revive oil and gas dominance by expanding domestic drilling, slashing green subsidies and positioning the U.S. as the top fossil fuel exporter.
But that vision is colliding with harsh market realities: oil stocks are sliding, crude prices are tanking fast, and investor money is flowing into the very sector Trump aimed to sideline—clean energy.
Is the “Drill Baby Drill” dream falling apart?
Trump's Drill Baby Drill Mantra Hits A Wall As Energy Stocks Tumble
The Energy Select Sector SPDR Fund (NYSE:XLE), the go-to ETF tracking large-cap oil and gas names, is flat in 2025—making it the worst-performing sector in the S&P 500.
In relative terms versus the SPDR S&P 500 ETF (NYSE:SPY), energy stocks are now trading at levels last seen in January 2022.
It's a grim scene across the sector: the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP) has dropped more than 7% year-to-date, while the VanEck Oil Services ETF (NYSE:OIH) is matching that decline.
Chart: XLE ETF Plunges To Near 4-Year Lows Against SPY
Meanwhile, Clean Energy Is Quietly Winning
As oil stumbles, clean energy has quietly staged a historic rally—effectively flipping investor expectations heading into Trump's pro-oil administration.
The Invesco Roundhill Clean Energy ETF (NYSE:PBW) is up a staggering 67% this year, outperforming oil equities for seven straight months—the longest streak since January 2021.
This turnaround puts 2025 on track to snap a multi-year run of oil outperformance that began in 2021.
Chart: Clean Energy Stocks Have Outperformed Oil Giants By 130% Since April 2025
Crude Hits $56, Eyes Lowest In Nearly 5 Years
As of Oct. 20, the price of West Texas Intermediate (WTI) crude sits at $56 a barrel, down 22% year-to-date and dangerously close to its lowest level since February 2021.
In a note shared last week, Bank of America's Francisco Blanch tied the oil slump to OPEC+'s decision to increase quotas by 4 million barrels per day over 18 months starting in April 2025.
Although inventories in advanced economies remain tight, much of the excess supply is going straight into Chinese reserves.
The market is also contending with renewed geopolitical tensions, including U.S. tariff threats against China and a defiant Iran resuming oil tracking transparency.
That effectively spells troubles for oil & gas stocks. According to Colin Fenton of 22V Research, the price decline has already pushed crude below the U.S. marginal cost of new capital expenditures, forcing producers to cut rigs. U.S. rig counts have fallen by 70 since early April.
"Cash crude prices are already in the $40s in Colorado and Kansas," he said, signaling that some producers are nearing operational losses.
At the same time, input costs for energy producers are rising. Fenton noted higher prices for steel, aluminum and copper are squeezing margins just as realized prices for oil plunge.
Jeff Jacobson of 22V Research highlighted a deteriorating technical setup for XOP, saying it recently broke below its 200-day moving average.
"If crude weakens toward $50 or equities broadly sell off, XOP could quickly ‘catch up' to crude's downside," he said, suggesting investors consider downside hedges like December put spreads.
Chart: Trump Said ‘Drill Baby Drill’, But Oil Rigs Are Shutting Down
Is Energy Cheap Enough To Buy Now?
Despite the gloom, valuations in the oil patch look historically attractive.
The XLE ETF trades at just 14 times forward earnings—40% below the S&P 500's 24x multiple.
Only three of XLE's 22 components—Chevron Corp. (NYSE:CVX), Kinder Morgan Inc. (NYSE:KMI) and The Williams Companies Inc. (NYSE:WMB)—have forward price-to-earnings ratios above 20x.
Notably, there are no XLE stocks trading above their median analyst price targets—suggesting that a fair amount of pessimism may already be baked into prices.
Devon Energy Corp. (NYSE:DVN) stands out with a P/E of 8x and analyst targets implying a potential upside of 40% from current levels.
In short, Trump's energy dream hasn't just stalled—it's shifting into reverse. Oil is cheap, rigs are going offline, and paradoxically, investors are piling into renewables.
Whether energy stocks are a bargain opportunity or just another value trap remains a question only time—and prices—will answer.
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