OPINION:
Of the many reasons President-elect Donald Trump trounced Vice President Kamala Harris, inflation is at or near the top of list. Too many Americans are being forced to choose between food on the table, medicine in the cabinet and a roof over their head. Too many American businesses have been forced into bankruptcy as inflation has squeezed margins; bankruptcy filings have risen by 40% in the past year alone.
There are many ways the president-elect has promised to curb inflation — and thereby bring down interest rates and credit costs. Yet none will be more important than “drill, baby, drill.” This is because of the outsized role that oil, natural gas and petroleum derivatives play directly and indirectly in the cost-price structure of the American economy.
In the transportation sector, it’s jet fuel for airplanes, gasoline for our cars and diesel for our trucks, buses, trains and ships.
Natural gas fires our power plants, gas turbines run our factories, propane helps cook and heat the food we eat. Petroleum is also the feedstock for our lubricants, plastics, polymers and fibers as well as for asphalt for road construction and roofing materials, foam for insulation and plastic for pipes.
In our households, there are personal care products such as cosmetics, shampoos and soaps and our plastic wraps, bags and containers. We even use petroleum products for medical supplies such as IV bags, syringes, and surgical instruments as well as ingredients and pills, capsules and medical devices.
Then there is this chicken-and-egg problem: American’s agricultural production accounts for a full 20% of energy expenditures. On our farms, it’s not just diesel and gasoline that drives our tractors and combines. Nitrogen-based fertilizers are derived from natural gas, while the mining of other types of fertilizers such as phosphates requires lots of energy.
Clearly, the road to price stability — and a return to American strategic energy dominance — runs through the oil fields of Alaska, Colorado, New Mexico and Texas and the fracking wells of Louisiana, Pennsylvania and Texas. If Mr. Trump can get the price of oil back down to $50 a barrel, that alone will shave half a point to a full point off the inflation rate.
Consider that under the first Trump administration, the price of oil averaged a little over $50 a barrel and gasoline about $2.50 a gallon. This compares with $80 per barrel on average during the first three years of the inflationary Biden regime and over $70 in 2024 while gasoline has been about $1 higher — a 40% spike.
How will Mr. Trump operationalize “drill, baby, drill”? Based on his campaign promises — he is the rare politician who actually keeps them — expect him to dramatically increase oil and gas drilling on other public lands and offshore areas, roll back the onerous environmental regulations established by the Biden administration, reverse the Biden administration’s pause on liquefied national gas exports and say “au revoir” to the Paris climate accord as he did in 2017.
Mr. Trump will likely reboot the Keystone XL pipeline, which would run nearly 1 million barrels of oil a day from Alberta, Canada, to the U.S. Midwest and certainly reverse President Biden’s restrictions on oil drilling in the Arctic National Wildlife Refuge, or ANWR. Fully ramped up, ANWR will produce 780,000 barrels of oil a day. Together, Keystone and ANWAR would account for almost 10% of U.S. daily consumption.
Those concerned about climate change would do well to reprise one of Sen. J.D. Vance’s finest moments in his debate with Tim Walz. Mr. Vance correctly pointed out that if it isn’t the United States producing and using fossil fuels, other far dirtier economies such as China will be polluting at higher rates.
Mr. Trump will use other important weapons to curb inflation. The Department of Government Efficiency led by Elon Musk and Vivek Ramaswamy is tasked with reducing government bureaucracy. Therefore, government expenditures should take pressure off the national debt and help drive down interest rates. DOGE will also channel tax dollars into more productive investments, thereby triggering a positive deflationary “supply shock.”
Of course, restoring at least some of America’s manufacturing and supply chains will certainly make them more stable and resilient and thereby reduce the kind of shortages that drive prices.
On the demand-pull side of the inflation equation, Mr. Trump’s immediate repeal of the electrical vehicle mandate coupled with what are likely to be significant demands to claw back other wasteful spending will help mitigate our current “too much money chasing too few goods” problem.
Together with a strategy aimed at driving oil prices back to $50 a barrel, these efforts will be key to cutting today’s Gordian inflationary knot. No one is better equipped to wield the knife than President-elect Donald Trump.
• Peter Navarro served as director of trade and manufacturing in the first Trump White House and is the author of “The New MAGA Deal: The Unofficial Deplorables Guide to Donald Trump’s 2024 Policy Platform.”
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