In dealing with inflation, President Trump said the US will drill baby drill, and somehow inflation would drop because of lower energy prices. It might work in a different era, but it is not likely to happen. There are a number of reasons including: unlike the era around Rockefeller, drilling for oil is very expensive. The oil world is dominated by large multinational companies including Chevron which recently signed a $50 billion deal with Kazakhstan; Exxon has monster oil field in Guyana; and as well in the US, the production level reached a new high in 2024 and the list goes on.

In an article by Shelia Dang and Valerie Volcovici of Reuters, US oil and gas companies are unlikely to expand development in Alaska and the Arctic.

US oil production is already at record levels owing largely to increase production in Texas and New Mexico and companies have limited spending on new projects to focus on returning cash to shareholders in either/or buyback of stock or dividends.

Analysts say drillers may not be in a hurry to take advantage of drilling in Alaska.

The first risk is since many of the areas which are opened by President Trump have been closed for years, it would take a lot of time and effort to get to a position to drill. The risk is the next administration may stop the drilling. According to the American Petroleum Institue, drilling in Alaska is a high-risk venture involving decades of work and billions of dollars in investments. (once the oil is discovered in commercial quantities, it needs a pipeline to transport to the coastal holding tanks to ship the oil to the Houston area refineries.

Energy consultancy Rystad said Mr. Trump mantra of drill baby drill, overestimates the industry’s willingness to prioritize growth over generating shareholder returns.

Linking to dividend paying stocks, some of the major oil companies have been paying dividends for generations and with the thought of peak oil coming, it will be hard to convince shareholders growth is better than shareholder returns. At Exxon, the CEO discusses the disciplined approach they have to managing their capital spending and expected returns for the money. It is hard to imagine they would change course to drill more.

One other comment is when Trump says drill baby drill, it generally only applies to small and medium sized companies. The large companies already have their capital budgets and expectations of returns. If one thinks about penny stock promoters, the President sounds like them.

There are more questions than answers, till the next time – to raising questions.