Trump's 'Drill Baby, Drill' Is Dead At Home And Abroad, Says Economist Paul Krugman: Oil Prices Are Not 'Sufficiently High'

President Donald Trump's renewed push for aggressive oil production faces harsh economic realities at home and abroad, according to economist Paul Krugman, who said that the strategy collapses under basic profit-and-loss math.

‘Drill Baby, Drill’ Is Dead

In his newsletter on Monday, Krugman said Trump returned to the White House with two major economic ideas: “tariffs and drill, baby, drill.”

Krugman also highlighted Trump’s promises on the campaign trail to slash energy prices, and his inaugural address in 2025, when he declared a national energy emergency, claiming, “We will be a rich nation again, and it is that liquid gold under our feet that will help to do it.”

However, according to the Nobel Prize-winning economist, this vision now reflects an outdated fantasy. “After decades of oil extraction, gushers are a thing of the past,” he said, noting that most U.S. production now comes from shale oil, which requires expensive hydraulic fracturing.

“Drilling a new well isn't worth doing unless the price of oil is sufficiently high,” he said, highlighting that the breakeven price for new drilling in major U.S. shale regions is “around $62 a barrel,” while oil prices are currently “slightly below that,” making new investment economically unattractive.

Krugman pointed to the Bureau of Land Management’s recent attempts to auction off “more than 20,000 acres of public land in Colorado” for oil and gas drilling that drew no bids as evidence that the market does not share Trump's enthusiasm.

Oil Companies Not Interested In Venezuela

According to Krugman, the same problem extends to Venezuela, with oil executives being largely unenthusiastic about Trump’s vision for the Latin American nation during a recent televised event at the White House.

Krugman also pointed to energy giant Exxon Mobil Corp. (NYSE:XOM) CEO Darren Woods‘ comments during the event, when he referred to the country as being “uninvestable” under current conditions.

In fact, the only company to make a firm commitment to Trump’s vision for the region was Chevron Corp. (NYSE:CVX), which is the only U.S. energy company with a presence in the country, with plans to significantly ramp up output following the capture of the nation’s President Nicolás Maduro.

“In other words,” Krugman concluded, “drill, baby, drill is dead, at home and abroad,” not because of environmental policy, but because the “profit-and-loss arithmetic” no longer supports it.

WTI March crude oil futures are rallying on Monday night, up 0.71% trading at $59.74, and up 4.90% over the past week, amid escalating tensions in Iran.

The iShares U.S. Oil & Gas Exploration & Production ETF (BATS:IEO), which tracks the leading U.S. oil and gas producers, was down 0.49% on Monday, closing at $90.60 per share. The fund scores poorly in Benzinga’s Edge Stock Rankings, but has a favorable price trend in the long term. Click here for deeper insights into the fund, its peers and competitors.

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