Why We Can Forget About “Drill Baby Drill” [Podcast]

Travis Stice is not one of those rare corporate CEOs who is a household name around the world... like Warren Buffett. But the two share a similar ethos. Buffett famously quipped, “Be fearful when others are greedy, and greedy when others are fearful,” which was ultimately a nod to the cyclical nature of markets and the economy. As surely as night follows day, and autumn/winter follow summer, bad times follow good... and then good times follow bad. Travis Stice understands this cyclicality all too well. As the founder/CEO of a large, pure-play Permian basin shale company (Diamondback Energy), he has seen ridiculously wild swings in the oil market, literally from nearly $150 per barrel all the way down to MINUS $40 per barrel, all within the past 15-20 years. So his warnings on the oil market are undoubtedly worth hearing. Stice penned an update to his shareholders earlier this week that bears special attention. And in it, he warned of the following: Over the past fifteen years, the US energy sector has provided extraordinary benefits to the US economy and American consumers. Rising oil production— thanks almost exclusively to shale producers— has kept energy prices low, driven job growth and exports, increased GDP, and filled government tax coffers. In 2024 alone, Texas collected $27 billion in state tax revenue from the oil and gas industry— more than the total tax revenue of more than 34 states. Yet oil production costs in the US have risen dramatically over the past decade. And tariffs make oil production significantly more expensive. There are further geological headwinds preventing further expansion; many shale resources are reaching their peak— or are already past their peak production. As a result of these factors, US oil production is now falling. Key metrics like crew counts and rig counts are down by as much as 20%. Simultaneously, oil is cheap right now. Adjusted for inflation— and adjusted for the cost of drilling— oil is nearly the cheapest it has been in decades (aside from the pandemic). With such cheap prices, there will be very little exploration for new oil... which is really bad for US energy independence, and likely means much higher prices in the future. Stice sums it up by saying, “This will have a meaningful impact on our industry and our country.” This is the topic of our latest podcast episode— and, candidly, the future of energy is pretty critical to understand. Oil may be cheap now, but this will likely be short-lived, and we could see a major price spike down the road— especially if the US dollar is displaced as the global reserve currency. We invite you to listen in to today’s podcast here. https://youtu.be/vG8fOhAeeTQ?si=wkO0LQB6QeoUWIp- You can access the podcast transcript here.