“We will drill, baby, drill,” former President Donald Trump exclaimed at last week’s Republican National Convention (RNC), promising to bring down inflation and drive energy costs lower.
Senior business reporter Ines Ferré elaborates on the difficulties a potential second Trump administration may face in reaching this goal on oil (CL=F, BZ=F) and gas prices (RB=F), namely whether corporations would be willing to comply and the direction regulations could swing energy costs.
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This post was written by Luke Carberry Mogan.
Video Transcript
Staying on the 2024 race for about 100 days until Election Day.
One of the key issues for voters is inflation.
Former President Trump gave his plan to tackle the issue of high prices in a speech at the RNC last week.
I will end the devastating inflation crisis immediately, bring down interest rates and lower the cost of energy.
We will drill baby drill.
But just how can he go about lowering energy prices?
Joining us now on this Yahoo Finance Senior market reporter.
Inez Far Inez Energy production Oil and gas production has gone up under President Biden.
So what is what is with this plan?
Look like it’s at a record under the Biden administration, So drill, baby drill.
Will energy companies?
Will oil and gas companies want to drill more than what they’re already drilling?
And that’s really the question.
And can trump, uh, persuade these companies to drill more.
So, look, I’ve talked to a slew of analysts about this.
The consensus is that right now, energy companies are focused on two things.
One is capital discipline and the other one is returning cash to shareholders through the form of dividends and share buy backs, that’s their focus.
If it gets too unprofitable to drill, then they will not keep drilling.
So once the profitability starts declining, you will see less and less drilling.
And you have a slew of consolidation that has happened in the energy space.
So they really have a lot more say as an overall group as to how much is, uh is produced.
Um, look, if we take a look at where we were at, uh, during the Trump administration and during the Biden administration when it comes to the energy space Trump, uh, XL EK was down more than 50% during the Trump Administration.
Of course you had the lockdowns.
You had the pandemic.
You had oil going subzero during that administration.
Then, when you are looking at the Biden administration, you’re looking at the war in Ukraine.
So energy prices spiked and you had the reopening.
So XL E actually soared more than 200% during the Biden administration.
But the bottom line is, is that these analysts are all saying you are going to see a lot more deregulation, a lot more leniency if Trump gets elected towards drilling on federal lands so all of that red tape will be taken out.
But I just got off the phone with somebody from an energy investment firm that said that red tapes would be out.
However, you still have market forces that are going to come into play, so if it does not, it’s it’s not profitable.
They won’t drill more.
And you also have really an oil market that is global.
So you have OPEC plus to contend with, with one analyst telling me you probably will see Trump trying to a going to ask these nations, the OPEC nations to, uh, put output more.
Uh, if he does get elected, well, we’ll see what ends up happening, Inez.
Thank you.
