The next president of the US, # 47, was heard to proclaim very recently the slogan ‘Drill Baby Drill‘. This slogan was first used by Lieutenant Governor Michael Steele of Maryland at the 2008 Republican National Convention. It was quickly picked up and made famous by Sarah Palin at the 2008 vice-presidential debate with Joe Biden. The slogan was used frequently by former president DJ Trump in his 2024 presidential campaign.

As slogans go, Drill Baby Drill successfully hit a nerve with Trump’s constituency if for no other reason than as a shout-in-your-face taunt. There was and is conservative consternation with liberal push-back on the practice of hydraulic fracturing (‘fracking’). It is not just fracking either. Opening public land to oil exploration was met with howls of dismay by Democrats over the plan to open up ANWR and other public lands to oil exploration, drilling and pipelines.

Many seem to believe, MAGAs in particular, that increased drilling and fracking will automatically decrease gas and diesel prices at the pump. From 50,000 feet up, that might seem to be true. More supply, lower prices or so the thinking goes. But economics learned in the back yard drinking beer while playing corn hole or from TikTok only takes you so far. There are many details that have their origins national and global politics as well as the many particulars of how the oil & gas supply chain actually works.

An excellent source of data on the global oil & gas situation is the International Energy Agency, IEA. They offer an excellent pdf report of the global oil picture extending to 2030. Here are the highlights from the IEA November 2024 Oil Market Report:

Consider

• World oil demand is forecast to expand by 920 kb/d this year and just shy of 1 mb/d in 2025, to 102.8 mb/d 2024 and 103.8 mb/d 2025, respectively. The slowdown in growth from recent years reflect the end of the post-pandemic release of pent-up demand and below-par underlying global economic conditions, as well as clean energy technology deployment. (kb/d = kilobarrels per day; mb/d = million barrels per day)
• Global oil supply rose by 290 kb/d in October to 102.9 mb/d, as the return of Libyan oil to the market more than offset lower Kazakh and Iranian supplies. OPEC+ delayed the unwinding of extra voluntary production cuts to January, at the earliest. Non-OPEC+ producers will boost supply by roughly 1.5 mb/d in both 2024 and 2025.
• Refinery margins improved in October as seasonal maintenance and economic run cuts supported product cracks. Global refinery runs hit a seasonal low in October before starting to recover in November and will average 82.8 mb/d this year and 83.4 mb/d in 2025. Annual growth of roughly 600 kb/d is driven largely by OECD Americas (+360 kb/d) this year and by non-OECD regions in 2025.
• Global oil inventories plunged by 47.5 mb in September, to their lowest level since January, led by a sharp draw in OECD oil products and non-OECD crude oil stocks. OECD industry stocks fell by 36.4 mb to 27.99 mb, 95.3 mb below the five-year average. Provisional data suggest total global stocks decreased for a fifth consecutive month in October.

According to Bloomberg,

‘Global oil markets face a surplus of more than 1 million barrels a day next year as Chinese demand continues to falter, cushioning prices against turmoil in the Middle East and beyond, the International Energy Agency said.’

As you may know, lately China has been having a rough go of it economically with their construction and real estate crises. Bloomberg reports that-

‘Oil consumption in China — the powerhouse of world markets for the past two decades — has contracted for six straight months through September and will grow this year at just 10% of the rate seen in 2023, the IEA said in a monthly report on Thursday. The global glut would be even bigger if OPEC+ decides to press on with plans to revive halted production when it gathers next month, according to the agency.’

The linked Bloomberg article paints a picture of static global demand for oil and weak prices extending into 2025 and possibly longer. So, this leads us to the question- How anxious does this picture make oil executives who are always looking for a reason to increase oil & gas exploration and drilling? Obviously, their planning goes well past 2025. Lower wholesale prices of gasoline and diesel out of the refinery do not automatically translate into proportionally lower retail prices at the pump. What would be the reason that a gas station owner would lower the retail price just because his wholesale fuel costs have dropped? Why would they forfeit profit margin to offer lower pump prices when they could keep prices as high as the market allows?

Do you think that a MAGA gas station owner with a red hat would offer reduced margins and prices to MAGA customers in red hats just … because he/she is generous? I don’t think so.

The reality has always been that fuel prices are based on what the customer is willing to pay. A president or candidate promising lower fuel prices in the USA should be viewed with serious skepticism. The entire supply chain from drillers to gas station owners struggle to maximize their profit margins and sales volumes 24/7. Do we really believe that the supply chain would bend to the price promises of some politico? Perhaps in Venezuela but look at what price fuel price meddling has done to that country.

Drill-Baby-Drill is a shallow chant used to polarize voters into opposing Democrats by lumping them into a contrived basket of anti-American fools. The trouble is that it works.

An effect of the internet and social media is that it brings the entire bell curve of voters to the table where many believe that all opinions are of equal merit. On the macroscopic scale, all citizens in the broader bell curve have a right to express their opinions. But just like at the microscopic scale of business, home and institutions, arguments and opinions without merit can be cast aside. Facts and solid logic should prevail over hand waving opinions.