“Drill, baby, drill” has become something of a liturgical expression on the right since its introduction at the Republican National Convention by Michael Steele (remember him?) in 2008, with Sarah Palin playing the Pauline role in the slogan’s rapid absorption into the American political lexicon.

While it is a trite platitude, the phrase has the benefit of being a good policy.

Unshackling America’s oil and gas industries from the fetters placed upon them by bad and hostile governmental policies and boosting fossil fuel production will make Americans wealthier, will make it cheaper to raise a family, and will probably do more to make the country greener than “renewables” like wind and solar ever could.

President Donald Trump has been right to adopt “drill, baby, drill” as a slogan and to proselytize the deeper message behind it. In a second term still in its infancy, he has enacted many policies to ensure that rhetoric matches reality.

Unfortunately, the man responsible for trying to unleash domestic energy production is the same man whose trade policies are most likely to retard that effort. Trump’s tariff policies are at odds with his administration’s stated energy goals. They will have deleterious consequences for America’s fossil fuel producers.

American oil production does not happen in a vacuum. It relies on an intricate network of cross-border energy flows, especially with Canada and Mexico. Canadian crude, particularly the heavy oil many American refineries are built to process, is a cornerstone of U.S. energy infrastructure. The same goes for Mexico’s Maya crude, which is essential to Gulf Coast refineries.

While Trump has exempted Canadian and Mexican crude from his mercurial tariff regime so far, his decision-making on who and what is and is not going to be tariffed seems to change by the hour, let alone the day. That uncertainty is not helpful to the industry. Will he change his mind in the next few months? No one knows.

Still, to name two examples, Trump’s tariffs on commodities like steel and aluminum can have a direct and meaningful ripple effect on oil and gas production and the American economy.

Oil and gas projects rely heavily on steel and aluminum for drilling rigs, pipelines, offshore platforms, storage tanks and refineries, and many other things. Tariffs on imported steel and aluminum mean producers face higher materials costs, which affect drilling projects, the construction of new liquified natural gas terminals and pipeline expansion.

This could lead to delayed projects due to procurement challenges and budgetary revisions, slowing the pace of expansion in fossil fuel development. If American producers can’t source enough domestic steel to meet the specifications for their projects, and tariffs increase the cost of imported steel so much that it becomes too expensive to purchase, those projects could be halted.

These higher costs and longer project timelines can mean lower profit margins, a potential pullback in investment, especially in low-margin areas like smaller shale plays or aging infrastructure, and increased pressure on midstream companies like pipeline and transport operators that work on tight margins.

In a March survey, oil executives told the Federal Reserve Bank of Dallas that the scenario is already happening. Here’s what they had to say:

“The administration’s tariffs immediately increased the cost of our casing and tubing by 25 percent even though inventory costs our pipe brokers less,” one executive told the Dallas Fed. “U.S. tubular manufacturers immediately raised their prices to reflect the anticipated tariffs on steel. The threat of $50 oil prices by the administration has caused our firm to reduce its 2025 and 2026 capital expenditures. ‘Drill, baby, drill’ does not work with $50 per barrel oil. Rigs will get dropped, employment in the oil industry will decrease, and U.S. oil production will decline as it did during COVID-19.”

“I have never felt more uncertainty about our business in my entire 40-plus-year career,” said another.

“Uncertainty around everything has sharply risen during the past quarter,” another executive said. “Planning for new development is extremely difficult right now due to the uncertainty around steel-based products.”

“The rhetoric from the current administration is not helpful,” said one. “If the oil price continues to drop, we will shut in production and do quick drilling.”

Finally, “uncertainty around tariffs and trade policy continues to negatively impact our business, both for mid- to long-term planning and near-term costs. Because of trade tension, especially with Canada, a large operator requested we look to potentially move manufacturing out of the U.S. to support their work in Canada and other international markets.”

Trump’s tariffs are undercutting the industries he claims to support. The result will be higher feedstock costs for refiners, tighter profit margins, and a disincentive to invest in drilling and production. Instead of boosting U.S. oil production, a critical administration policy goal, these tariffs are likely to throttle it. Capital projects will stall, drilling activity will cool, and smaller producers, especially those that rely on narrow margins, may shut down entirely.

You can “drill, baby, drill,” or you can “tariff, baby, tariff,” but you can’t do both.

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ABOUT THE WRITER

Tim Benson is a senior policy analyst with The Heartland Institute. He wrote this for InsideSources.com.

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