If you’ve been following the news lately, you probably saw the headlines about the "national energy emergency." The rhetoric coming out of the White House is basically a 1970s fever dream. Liquid gold. Gushers. Making America rich again by punching holes in every square inch of public land. But in the Paul Krugman latest column, the Nobel laureate takes a massive sledgehammer to this fantasy. Honestly, he’s not even looking at the environmental impact this time; he’s looking at the checkbook.
Krugman’s newest piece, "The Ignominious Death of Drill, Baby, Drill," is a cold shower for anyone expecting a massive oil boom to lower their grocery bills.
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The Profit-and-Loss Math Doesn't Care About Slogans
Economics is usually messy, but Krugman points out something pretty simple: oil companies aren't charities. They don't drill just because a politician tells them to. They drill because they want to make money.
The "Drill, Baby, Drill" mantra assumes we’re still in the era of easy oil. You know, the kind where you poke the ground and a fountain of black gold hits the sky. That world is gone. Today, we’re talking about shale. We’re talking about hydraulic fracturing—fracking. It’s expensive. It’s high-maintenance.
Krugman cites some pretty damning data from the Bureau of Land Management. They recently tried to auction off over 20,000 acres of public land in Colorado for drilling. Guess how many bids they got? Zero. None. Zilch.
Why? Because the market knows what the politicians won't admit. The breakeven price for a new shale well in the U.S. is roughly $62 a barrel. As Krugman notes, oil prices have been hovering right around or slightly below that mark. If it costs you $62 to get a barrel out of the ground and you can only sell it for $59, you don’t drill. You go play golf instead.
The Venezuela "Oil Fantasy"
It gets weirder. The Paul Krugman latest column also dives into the administration’s obsession with Venezuela. There’s been all this talk about the U.S. "capturing" a lucrative prize in the form of Venezuelan oil reserves.
Krugman calls this "decades out of date."
- The Quality Issue: Venezuelan oil isn't the light, sweet stuff. It’s "extra-heavy" crude. It looks like molasses and is about as easy to refine as asphalt.
- The Infrastructure Nightmare: The country’s oil infrastructure hasn't just been neglected; it’s been cannibalized. You can’t just flip a switch and start pumping 50 million barrels.
- The Investor Exodus: ExxonMobil CEO Darren Woods recently called the country "uninvestable." When the biggest oil company in the world says "no thanks," a campaign slogan isn't going to change their mind.
Basically, the idea that the U.S. can just seize or "liberate" Venezuelan oil to crash global energy prices is a pipe dream. It’s what Krugman describes as a "crude delusion."
What This Actually Means for Your Wallet
So, if the oil boom is a bust, where does that leave us?
Krugman argues that we are entering a period of "creeping malaise." The administration promised lower prices and a manufacturing resurgence driven by cheap energy. But if the energy isn't actually cheap to produce, those promises fall apart.
Instead of a "hot" economy, we're seeing consumer confidence tank. The latest jobs report for late 2025 shows a labor market that feels stagnant, even if it’s not technically in a freefall recession.
The reality is that we’re chasing a 20th-century solution for 21st-century problems. While the rest of the world—including our competitors in Europe and even China—is leaning into the energy transition because the economics of renewables are becoming undeniable, the U.S. is trying to subsidize a dying extraction model.
Actionable Insights for the "New" Economy
You can't change national policy, but you can change how you react to it. Based on the economic realities Krugman is highlighting, here is how to navigate the next few months:
- Don't Bank on $2 Gas: The "liquid gold" isn't coming to save your commute. Energy prices are likely to stay volatile because production is tied to high breakeven costs, not political willpower.
- Watch the Interest Rates: If the administration tries to force growth through deregulation that the market ignores, the Fed is going to stay in a tough spot. Expect "higher for longer" to remain the theme.
- Ignore the "Energy Emergency" Noise: Markets are already pricing in the fact that these land auctions are failing. Look at what oil majors like Chevron and Exxon are doing with their capital, not what the 24-hour news cycle is saying.
The Paul Krugman latest column reminds us that you can ignore the laws of economics for a while, but eventually, the math always wins. Slogans don't drill wells; profits do. And right now, the profits just aren't there.
Keep a close eye on the WTI (West Texas Intermediate) crude prices. If they stay below that $62 breakeven point, all the executive orders in the world won't put more oil in the pipelines. We are watching a collision between political nostalgia and hard-headed market reality.
Next Steps for Readers:
Review your investment portfolio for over-exposure to U.S. shale companies. If Krugman is right and the "drill, baby, drill" era is dead on arrival due to breakeven costs, these firms may face significant headwinds regardless of government support.