Could Trump’s drilling plan cut fuel prices and fix inflation?

President-elect Donald Trump has pledged to lower consumer prices that have soared since the pandemic, explaining how he would do so by repeating a simple mantra: “Drill, baby, drill.” He is expected to speed drilling permits that took an average of 258 days to complete during the Biden administration, hold permit sales more frequently, and increase drilling off the US coast. By boosting oil supplies, those steps theoretically could reduce oil and gasoline prices and help nudge down the price of groceries and other goods by cutting their transportation costs.

However, most experts believe that this strategy is not likely to work. It is a world oil market that determines the supply and demand balance. A significant boost in US production would trigger responses from other producers that would leave crude and fuel prices roughly unchanged. The actual inflation rate today is about 20% higher than they were before the COVID-19 pandemic sparked a surge in consumer demand and supply chain bottlenecks.

The drop to record global oil production, especially in the US, could be attributed to softening energy demand in China and around the world amid slower growth and the ability of European nations to find alternative sources to Russian oil. The US is already the world’s largest crude oil producer, churning out a record average of 13.6 million barrels a day recently. The nation turned out an average of 12.9 million barrels a day of crude in 2023 and has been the world’s largest producer for the past six years, ahead of Saudi Arabia and Russia.

US oil production is at an all-time high, and it has increased during the Biden administration without opening up” any new lands or waters to drilling. The EIA credits horizontal drilling and hydraulic fracturing, or fracking, with allowing producers to use fewer wells to draw much more oil from a larger area. Much of the activity has occurred in the Bakken rock formation in North Dakota and Montana and the Permian Basin in West Texas and New Mexico.

Crude prices are hovering near a three-year low. If the Trump administration made new federal land or waters available for drilling and that led producers to pump out enough additional oil to push down global and US prices, that would slow the rate at which companies drill for oil. The current US crude oil price constitutes a floor. Companies can make a profit as long as oil prices top about $25 a barrel. But the cost to drill a new well is about $45 to $65 a barrel. Because the company wants to cover its costs and make about a 15% profit, if prices got any lower, it would stop producing oil.

Oil companies have become far more conservative in their capital spending since the early days of the pandemic, when crude prices plummeted on weak demand. Since the early days of the pandemic, oil producers have shifted their mindset from spending heavily to drill new wells to running existing wells cost-efficiently and providing healthy returns to shareholders. Most oil production takes place on privately owned territory, and about a quarter occurs on federal land and waters. A sudden rise in prices that threw the market out of balance probably would prompt an immediate boost in production by the Organization of the Petroleum Exporting Countries, or OPEC.

That’s largely why the US imports 6.5 million barrels a day of mostly heavy crude, even though the country seemingly makes enough oil to meet its needs. And the nation exports 4 million barrels of light sweet crude to nations whose refineries are built to handle that variety.