Why Drill, Baby, Drill Is Just A Dream

Alright, today I am diving into why the reality of oil production isn’t just about political promises but mostly about the interests of the oil companies themselves.

Sure, Trump likes to chant drill, baby, drill, but if oil companies decide their profits are safer with lower production, guess what? That’s exactly what they’ll do.

Now, if production increases even further, oil prices—which are currently hovering around $70 per barrel—will drop even more. And, naturally, that’s something oil companies want to avoid.

So here’s the deal: Trump has repeatedly promised to ramp up domestic oil and gas production, ditching the renewable energy push championed by Biden. Translation: more drilling, more production, more jobs. Sounds great, right?

But let’s not forget, the U.S. is already the largest oil producer in the world. If production increases even more, oil prices will fall further. And that, of course, is something the oil giants are keen to steer clear of.

Enter Exxon Mobil

This is where things get interesting. As Liam Mallon, head of Exxon Mobil's upstream division, said at the Energy Intelligence Forum in London: You’re not going to see anyone in ‘drill, baby, drill’ mode. Translation: Exxon and many other companies have no intention of dramatically increasing production, no matter who’s sitting in the Oval Office.

Why not? The answer is simple: financial discipline. Oil companies—Exxon Mobil in particular—care more about maintaining their profits than playing political games. As Mallon put it, “A radical change in production is unlikely because the majority, if not all, are focused on economic returns.” In other words, they won’t crank up production if it means oil prices (and their profits) will drop.

Beyond Oil Profits

But there’s more to Exxon Mobil’s strategy than just oil. As CEO Darren Woods has pointed out, Exxon is backing the Paris Agreement and the Inflation Reduction Act. Why? These initiatives offer incentives for projects like carbon capture, hydrogen production, and sustainable aviation fuels. And, as you might’ve guessed, these are opportunities—not obstacles—for the oil giants.

So, while the rhetoric might sound like “drill, baby, drill,” the reality is far more calculated. Oil companies are playing the long game, and that includes exploring green energy opportunities while keeping their bottom lines intact

We need to keep in mind that what politicians say doesn’t matter as much as what companies actually do. His promise to increase production might look good on paper, but as we’ve seen, the companies themselves aren’t willing to play that game.

Posted Using InLeo Alpha