President Donald Trump came back to the White House with what economist Paul Krugman describes as two big economic ideas: tariffs and "drill, baby, drill." The problem? One of them is already dead on arrival, and it's not because of environmental regulations or political opposition. It's because the numbers don't add up.

When the Economics Kill the Dream

In his Monday newsletter, Krugman walked through why Trump's renewed energy push is colliding with some uncomfortable economic realities. Remember all those campaign promises about slashing energy prices? Or Trump's 2025 inaugural address declaring a national energy emergency and proclaiming, "We will be a rich nation again, and it is that liquid gold under our feet that will help to do it"? According to the Nobel Prize-winning economist, that vision now looks more like an outdated fantasy.

Here's the thing: America isn't sitting on easy-access oil gushers anymore. Those days ended decades ago. Most U.S. production now comes from shale oil, which requires expensive hydraulic fracturing. And that changes the entire profit equation.

"Drilling a new well isn't worth doing unless the price of oil is sufficiently high," Krugman explained. The breakeven price for new drilling in major U.S. shale regions sits around $62 a barrel. Oil prices are currently trading slightly below that level, which makes new investment economically unattractive, regardless of how enthusiastically politicians talk about it.

Want proof that the market isn't buying into Trump's enthusiasm? The Bureau of Land Management recently tried to auction off more than 20,000 acres of public land in Colorado for oil and gas drilling. The result? Zero bids. Not a single company thought it was worth the investment.

Venezuela Isn't Looking Any Better

The economic challenges don't stop at America's borders. Krugman noted that the same fundamental problem extends to Venezuela, where oil executives showed remarkably little enthusiasm during a recent televised White House event focused on Trump's vision for the Latin American nation.

Exxon Mobil Corp. (XOM) CEO Darren Woods didn't mince words during the event, describing the country as "uninvestable" under current conditions. That's not exactly the rousing endorsement Trump was probably hoping for from one of the world's largest energy companies.

In fact, only one company made a firm commitment to Trump's regional vision: Chevron Corp. (CVX), which happens to be the only U.S. energy company with an existing presence in Venezuela. Chevron announced plans to significantly ramp up output following the capture of President Nicolás Maduro, but even that commitment feels more like making the best of an existing position than rushing into a new opportunity.

"In other words," Krugman concluded, "drill, baby, drill is dead, at home and abroad." And this time, it's not environmental activists or regulatory restrictions killing it. It's basic profit-and-loss arithmetic.

What the Market Is Saying

WTI March crude oil futures rallied on Monday night, trading up 0.71% at $59.74, with a 4.90% gain over the past week amid escalating tensions in Iran. But even with that recent bump, prices remain below the threshold needed to make new drilling economically compelling.

The iShares U.S. Oil & Gas Exploration & Production ETF (IEO), which tracks leading U.S. oil and gas producers, fell 0.49% on Monday to close at $90.60 per share. The fund has shown a favorable long-term price trend, though its near-term performance reflects the industry's current challenges.

The bottom line? You can declare national emergencies and talk about liquid gold all you want, but if the economics don't work, the drilling rigs stay parked. And right now, with breakeven costs sitting above market prices, that's exactly where they're staying.