The Issues: Trump’s Proposal to Lower Prices by Increasing Energy Production

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Former President Donald Trump has cited more energy production, specifically drilling for oil and natural gas, as the key to bringing down energy prices, and inflation overall. He promises to “cut energy prices in half within 12 months” of taking office.

“We will frack, frack, frack and drill, baby, drill,” Trump said in Detroit on Oct. 18. “I will cut your energy prices in half within 12 months. … Cut them in half within 12 months of taking office. That’s going to bring everything down.”

It’s a standard refrain in many of Trump’s speeches. “We have tremendous wealth in this country, but it’s under our feet. It’s called liquid gold. And we’re going to bring down your energy costs. And, with that, everything’s going to follow,” he said at an Oct. 16 town hall on Fox News, in response to a question about his “plans to revitalize the economy.”

Economists and energy experts say that increasing the supply of oil and natural gas could bring down prices in the short term, if demand remains the same, but there are several complicating factors to Trump’s plan. The price of oil is set on a global market, subject to global supply and demand, and world events. Both U.S. and world producers react to those prices, shying away from producing more if the price is low. Experts we interviewed also didn’t see a way for Trump to lower energy prices for consumers by 50%.

When President Joe Biden encouraged oil companies to produce more in 2022, experts told us there was no quick fix for the supply crunch then — caused by the economic downturn during the COVID-19 pandemic. Gasoline prices rose as demand returned to pre-pandemic levels, and the Russian invasion of Ukraine further increased prices. Since then, gasoline and oil prices have come down.

The national average price of regular gasoline was just over $5 per gallon in the week ending June 13, 2022, but the latest price is down to $3.14 — 77 cents higher than week before Biden took office.

The Consumer Price Index for household energy, a measure of inflation for items used to heat, cool and power households, has gone up 29% under Biden, according to the Bureau of Labor Statistics. As with inflation overall, the CPI for household energy has moderated greatly since 2022 and early 2023. The measure is up 2.4% for the 12 months ending in September.

U.S. oil production has hit record levels. In 2023, the U.S. averaged more than 12.9 million barrels per day, higher than the previous record of more than 12.3 million barrels in 2019, according to Energy Information Administration data. The EIA projected that would rise to an average of 13.2 million barrels per day for 2024.

Trump wants that production to go much higher.

Trump’s Energy Policies

Trump’s proposals call for more domestic production of fossil fuels, and the rollback of regulations and renewable energy incentives.

In Michigan in late August, Trump said he could cut consumers’ energy costs by 50%, adding, “we can do that if you have the oil supply, which we have more than anybody. Your heating and air conditioning, electricity, gasoline all can be cut down in half. … To achieve this rapid reduction in energy costs, I will declare a national emergency to allow us to dramatically increase energy production, generation and supply. … Starting on Day 1, I will approve new drilling, new pipelines, new refiners, new power plants, new reactors, and we will slash the red tape.”

Trump’s campaign website says he will speed up the approval of drilling permits and leases; fill the Strategic Petroleum Reserve; stop environmental litigation; provide tax relief to oil, gas and coal companies; and rollback emissions regulations adopted under Biden, among other measures.

We asked the Trump campaign for support for his claim that he can lower consumers’ energy bills by half in one year, but we haven’t received a response. Last month, CNBC reported that the campaign referred it to David Bernhardt, who was interior secretary under Trump. “The president can expand access to various areas of development,” CNBC quoted Bernhardt as saying. “He can increase the number of lease sales. He can do a great deal to expedite the processing of applications with permits to drill, which have been significantly delayed over time.”

Trump’s promise has included some false and misleading claims. He often says the U.S. has “more liquid gold under our feet than any other country,” but there are several countries with more estimated oil and natural gas reserves. Experts on energy at the Brookings Institution wrote this summer that “U.S. oil reserves rank somewhere between ninth and 11th, depending on whom you ask. (Estimating reserves is an inexact science and methodologies differ.) The United States ranks fourth or fifth in the world in natural gas reserves.”

Trump also says the U.S. “will quickly become energy independent” if he is elected. But by Trump’s definition of the term, the U.S. has remained “energy independent” under Biden’s administration.

As we’ve explained before, the U.S. still imported energy, including crude oil, when Trump was in office. By “independent,” he likely means the U.S. produced more energy than it consumed or exported more than it imported. But that’s still the case under Biden.

What Experts Say About More Drilling to Lower Prices

Experts we interviewed said increasing the domestic supply of oil and natural gas — if worldwide demand stayed constant — could lower prices, at least somewhat or for a short period of time. But ramping up the supply is a decision oil and gas companies have to make, and they wouldn’t be inclined to produce more for a lower price. And even if they could be incentivized to produce more oil and gas for less in profit, international producers would react to the increased U.S. supply by pulling back on their production.

Sanjay Patnaik, director of the Center on Regulation and Markets and a senior fellow in economic studies at the Brookings Institution, told us there was a “really low likelihood that drilling for more oil … would lower prices,” because those prices are set at the world market. “Any additional production we have would go to the world market, and then it depends on the demand.”

Natural gas is more localized, Patnaik said, and could in theory have more of an impact on prices. Natural gas is either in a pipeline or shipped overseas as liquefied natural gas. More natural gas production, he said, would be expected to lower prices, “but if I’m a producer, I wouldn’t increase production much because it would hurt my profits.” For exported LNG, there would need to be demand abroad, and new facilities would need to be constructed.

“Yes, all else equal, more energy production in the U.S. would reduce prices overall,” Travis Fisher, director of energy and environmental policy studies at the libertarian Cato Institute, told us in an email. Oil prices, though, “are difficult to move because they are established by global supply and demand,” he said. “But it’s true that additional production in the U.S. would put downward pressure on global prices.”

And energy prices do affect the price of other goods. “Significant reductions in the cost of all energy resources would mitigate overall price increases because energy is a costly input into nearly every good and service sold,” Fisher said.

Cullen Hendrix, senior fellow at the Peterson Institute for International Economics and a nonresident senior research fellow at the Center for Climate & Security, told us in an email that “on margin, increased US oil and gas production would lower prices,” but he, too, said that oil is a global commodity. A large increase in U.S. production “would have effects for other producers, driving higher cost ones into dormancy. This is truer for oil than gas, the market for which is more segmented.”

Since oil and gas “are widely traded, it’s very difficult to lower prices unilaterally through increased US production,” Hendrix said. “[I]t might work over the short-term (and that’s still doubtful), but over the medium and longer terms markets would adjust accordingly. Sustained low prices typically only come when there’s a massive surplus in markets due to demand cratering. The conditions that would have to come about for that to happen to bring about the targeted prices are simply not at all likely to materialize.”

Experts also pointed out that the U.S. doesn’t have state-run oil and gas companies, like some other countries do, limiting the ability of a president to get companies to increase production. “The US is not Saudi Arabia or Russia: the president just doesn’t have the policy levers to control oil output and prices to these extents,” Hendrix said.

Presidents either want the credit or get the blame for oil and gas prices, but those prices are “largely out of the hands of the presidency,” Patnaik said. “It’s a very complex economic picture. Not easy to untangle.”

A president could open up more federal land for drilling, but it would take some time for new oil or gas drilling to be operational — and the market dynamics could change in the interim, changing the profit incentive for producers.

That’s what experts told us in 2022, when we fact-checked Biden’s claim that oil producers could simply increase supply with approved but unused federal permits to bring down prices. “New production takes time. For in-fill shale oil or gas wells in areas that are already being developed, you might get some new drilling and production in a matter of months. Any new leases would take years to produce,” Samantha Gross, director of the Energy Security and Climate Initiative and a fellow in foreign policy at Brookings, told us.

Similar to what we heard from other experts, Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks fuel prices, told NPR on Sept. 22 that “ultimately, it’s at oil companies’ whims if they’d like to increase production or not. And should oil prices decline to the point the president likes, it would be at a point where many oil companies are losing money on every barrel.”

Even if Trump could get companies to drill more, oil producers and other countries would respond to that increased supply so that prices wouldn’t decline too much, De Haan said. “And countries outside of the U.S. – like OPEC countries, Russia, Saudi Arabia – would likely offset any increase in U.S. production by cutting their own. … Whether U.S. oil producers or foreign oil producers, nobody’s going to be profitable at $35 a barrel, which is roughly half of where oil prices stand today.”

In a Sept. 4 article, the Wall Street Journal quoted experts expressing many of these same doubts about a president easily increasing production and lowering energy prices. Oil producers, the story said, “are more focused on returning cash to shareholders than on growing production.”

As for Trump’s promise to cut consumer energy prices by 50%, Patnaik said he hadn’t seen any studies backing that up. He said it was “quite unlikely to me,” particularly in the short term.

Hendrix said, “My net-net is that Trump would not be able to deliver on this promise unless the global economy craters, the US cuts itself off from global energy markets, and US producers are convinced to produce at price levels that would not sustain operations.”

Fisher told us that “[e]lectricity prices are notoriously hard to bring down, in part because policies at both the state and federal level are putting significant upward pressure on them.” He said if Trump promised to nullify federal policies that could increase future electricity prices, “I would view that as a workable policy. But I see no way for policy reforms at the federal level to reduce today’s electricity bills by half.”

The annual average monthly residential electric bill in the U.S. has gone up from about $117 in 2020 to $138 in 2023, an increase of 18%. That’s in nominal terms, meaning not adjusted for inflation, and the bulk of the increase occurred from 2021 to 2022. Last year, the average bill rose 2%, lower than inflation and “in line with the 2% average annual increase over the past decade,” according to a report from the EIA.

Electric bills vary by state, from an average $87 per month in Utah last year to $213 in Hawaii.

In describing his promise to lower energy costs, Trump also has pointed to low gas prices during his term, citing a figure of $1.87 per gallon. Throughout the campaign, Trump has repeatedly — and misleadingly — boasted of getting gasoline down to that level. But prices like that came early in the COVID-19 pandemic, when global demand fell as people stayed home and businesses closed. Gasoline hit a low of $1.77 the week of April 27, 2020.

“The $1.87 gas price Trump has targeted came in the context of the worst global pandemic and recession since the Great Depression. Unless he’s planning on delivering a massive recession like that – and I’m sure he’s not – it would be impossible to drive US production high enough to hit that target in the short (one-year) run, in addition to being economically self-defeating,” Hendrix said.

When Trump left office, gasoline was $2.38 a gallon, as the economy was still recovering.

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