Drill, Baby, Drill and $50 Oil To Curb Inflation

Inflation is Public Enemy #1

Drill, Baby, Drill and $50 Oil To Curb Inflation

Of the many, many reasons Donald Trump trounced Kamala Harris, inflation is at or near  the top of list.  Today, too many Americans are being forced to choose between food on the table, medicine in the cabinet, and a roof over their head.  Today, too many American businesses have been forced into bankruptcy as inflation has squeezed margins; bankruptcy filings have risen by 40% over the past year alone.

There are many, many ways President-elect Trump has promised to curb inflation – and thereby also bring down interest rates and credit costs.  Yet none will be more important than “drill, baby, drill.”  This is because of the outsized role oil, natural gas, and petroleum derivatives play directly and indirectly in the cost-price structure of the American economy.

In the transportation sector, its jet fuel for airplanes; gasoline for our cars; diesel for our trucks, buses, trains, and ships. 

Natural gas fires our power plants, gas turbines run our factories, propane helps cook and heat the food we eat; and petroleum is also the feedstock for our lubricants, plastics, polymers, and fibers as well as for asphalt for road construction and roofing materials, foam for insulation, plastic for pipes. 

In our households, there’s personal care products like cosmetics, shampoos and soaps and our plastic wraps, bags, and containers.   We even use petroleum products for medical supplies like IV bags, syringes, and surgical instruments as well as ingredients and pills, capsules and medical devices.

Then there is this chicken and the egg problem: American’s agricultural production accounts for a full 20% of energy expenditures.  On our farms, it’s not just diesel and gasoline that drives are tractors and combines.  Nitrogen based fertilizers are derived from natural gas while the mining of other types of fertilizers like phosphates is highly energy intensive. 

Clearly, the road to price stability – and a return to American strategic energy dominance -- runs through the oil fields of states like Alaska, Colorado, New Mexico and Texas and the fracking wells of states like Louisiana, Pennsylvania, and Texas.   If Donald Trump can get the price of oil back down to $50 a barrel, that alone will shave anywhere from a half to full point off the inflation rate.

Consider here that over the first four years of the Trump administration’s strategic energy dominance, the price of oil averaged a little over $50 a barrel and gasoline about $2.50.   This compares to $80 per barrel on average during the first three years of the inflationary Biden regime and over $70 in 2024 while gasoline has been about a dollar higher – a 40% spike.

How will President Trump operationalize “drill, baby, drill?”  Based on his campaign promises – he is that rare president who actually keeps them  -- expect Trump to dramatically increase oil and gas drilling on other public lands and offshore areas, roll back the onerous environmental regulations established by the Biden administration, reverse the Biden administration’s pause on LNG exports, and say “au revoir” to the Paris Climate Accord as he did in 2017.  

Trump will likely reboot the Keystone XL pipeline which would run nearly a million barrels of oil a day from Alberta, Canada to the U.S. Midwest and certainly reverse Joe Biden’s restrictions on oil drilling in the Arctic National Wildlife Refuge (ANWR).  Fully ramped up, ANWR will produce 780,000 barrels of oil a day.  Together, Keystone and ANWAR would account for almost 10% of US daily consumption.

For those concerned about climate change, they would do well to reprise one of JD Vance’s finest moments during his debate with Tim Walz.  Vance correctly pointed out that if it isn’t the United States producing and using fossil fuels, other far dirtier economies like China will be polluting at higher rates.

Yes, there will be many other important weapons Donald Trump will use to curb inflation.  The Musk-Ramaswamy DOGE to dramatically reduce government bureaucracy and therefore government expenditures will take pressure off the national debt and help drive down interest rates.  Musk-Ramaswamy will also  channel tax dollars into more productive investments and thereby trigger a positive deflationary “supply shock.” 

Of course, reshoring at least some of America’s manufacturing and supply chains will certainly make them more stable and resilient and thereby reduce the kind of shortages that drive of prices.

On the demand-pull side of the inflation equation, Trump’s immediate repeal of the electrical vehicle mandate coupled with what are likely to be significant demands to claw back all manner of other wasteful spending by Biden-Harris will help mitigate our current “too much money chasing too few goods” problem.   

Together, with a drill, baby, drill strategy aimed at driving the price of oil back to $50, these efforts will be key to cutting today’s Gordian inflationary knot.  No one is better equipped to wield the knife than President-Elect Trump.

Peter Navarro served as the Director of Trade and Manufacturing in the first Trump White House and is the author of The New MAGA Deal: The Unofficial Deplorables Guide to Donald Trump’s 2024 Platform.