The Blubber

Republican presidential candidate Donald Trump said his top priority if reelected to the White House will be to “drill, baby, drill” to lower the cost of energy.

Republican presidential candidate Donald Trump has stated that if he is reelected, his top priority will be to "drill, baby, drill" in order to reduce energy costs. Speaking at the Republican National Convention last Thursday, Trump emphasized that Republicans have a plan to lower prices rapidly. "By slashing energy costs, we will in turn reduce the cost of transportation, manufacturing, and all household goods," he said.

However, industry experts caution that energy companies may not want to increase oil production if prices drop too low. Samantha Gross, director of the energy security and climate initiative at the non-partisan Brookings Institution, noted, "You’re not going to produce so much that you decrease the price of your product that much."

A nationwide energy survey by the Dallas Fed indicated that firms need oil prices to be at least $64 per barrel on average to profitably drill. As of Wednesday, West Texas Intermediate was trading above $77 per barrel, while Brent, the international benchmark, was just above $81 per barrel.

Rebecca Babin, US senior energy trader at CIBC Private Wealth, told Yahoo Finance that "the lower the price goes, the less US producers will drill or pump, as fewer wells will be profitable." She noted that following a wave of consolidation, oil companies are prioritizing returning cash to shareholders and maintaining capital discipline, which limits the feasibility of the "drill, baby, drill" approach.

"Consolidation will give acquiring companies more influence over US production. The larger companies have been more focused on capital returns and will likely be less influenced by political pressures," Babin added.

Philip Rossetti, a resident senior fellow for the energy policy program at the center-right think tank R Street Institute, suggested that Trump's most significant influence on producers would likely come from easing permitting restrictions for drilling on public land. The Government Accountability Office found that in 2016, under Democratic President Barack Obama, it took an average of 196 days to review drilling permit applications. This process time was cut by more than half by 2019 during Trump's presidency.

"There is a big qualitative difference in how easy it is to navigate the process and increase production on federal land, which is a significant portion of our oil and gas production," Rossetti said.