Dear Readers,

Look, the U.S. oil sector had its absolute worst stretch under Ronald Reagan.

Prices fell so substantially during his presidency that even his own Vice President—George H.W. Bush—made the rather puzzling suggestion that OPEC should be prodded to restrain oil prices from further decline.

Think about that for a second.

When markets are untouched by the powers that be, the unpredictable often follows.

Reagan decontrolled gasoline prices in one of his first official acts as president.

The response? Everyone said the former actor was naïve.

Ted Kennedy leaned on Democrats to oppose Reagan. His view was that gasoline prices without governmental restraints would rise above $2 per gallon.

Yes, how quaint that sounds now.

Then-Massachusetts congressman Ed Markey described decontrol as something "worse than the disease of oil addiction."

Much that Reagan's critics predicted proved completely false.

A barrel of oil that had fetched as much as $40 in 1980 fell as low as $7.

Seven dollars.

Reagan was too smart to predict markets. So he decontrolled them instead.

What happened with oil in the 1980s speaks to how quickly market outlooks can change.

And by extension, the conceited folly of predicting those same markets.

On January 28, 1981—the day Reagan announced decontrol of oil and gas prices—oil exploration would have been viewed as a brilliant idea.

Politicians, economists, and oil experts all believed fuel prices were set to surge without governmental guard rails.

A few years into his presidency? A proposal to invest in U.S. extraction would have netted the proposer haughty dismissal.

The economics of stateside oil extraction no longer made sense. Oil had become too inexpensive.

Markets not infrequently reveal what few people see coming. Left, right, or center.

The Reagan story matters now because President Trump is pursuing policies meant to dismantle subsidies for solar and various "green" energy sources.

Implicit in this is Trump's view that fossil fuels like oil, plus nuclear and geothermal, comprise what the energy of tomorrow will be.

Except there's no way of knowing that.

And it's not just the up and down fortunes of the oil sector that support this assertion.

Consider November 30, 2022.

The day OpenAI released ChatGPT.

Not only did a previously unknown business emerge that can presently claim a $750 billion valuation.

The world's most valuable company—Nvidia—came out of relative obscurity that same day.

What's crucial about the high-profile arrival of Nvidia and OpenAI a little over three years ago?

These developments profoundly changed the energy story in ways we're still trying to fathom.

For instance, it was recently reported in the New York Times that Amazon, Apple, Google, Meta, Nvidia, OpenAI, and Oracle spent $1.4 trillion last year.

On data center and manufacturing projects alone.

And as most of you know, the data centers will be consuming energy on a scale previously unseen.

Or perhaps even imagined.

Despite this reality, despite the present and future of commerce changing constantly, President Trump is inserting the federal government into the energy space.

Deciding what energy forms will and will not play a role in the future.

He and those close to him would be wise to step back.

Exactly because the look of commerce is in constant flux, so will be the energy mix meant to power it.

Which means Trump is flying blind when he arrogates to himself the ability to centrally plan domestic energy production.

He's making predictions he has no business making.

See Reagan once again.

Rather than take energy sides, he got out of the way.

Trump should do the same.

Here's the fundamental problem with government picking energy winners.

They can't see what's coming any better than the rest of us.

Actually, they see it worse. Because they're insulated from market signals.

When ChatGPT launched, did anyone in government predict the massive energy implications?

No.

Did the tech companies themselves fully understand what they were unleashing?

Probably not.

Markets adapt to new realities within days or weeks.

Government policy takes years to change.

By the time Trump's energy policies are fully implemented, the energy landscape will have shifted completely.

Maybe AI data centers will be the biggest energy consumers. Maybe they won't.

Maybe fusion power becomes viable. Maybe it doesn't.

Maybe solar technology makes a breakthrough that changes everything. Maybe it stalls.

Nobody knows. Including Trump.

Reagan had it right.

Don't pick winners in energy. Don't pick losers either.

Get government out of the subsidy game entirely. Let markets figure out what works.

When you subsidize solar, you're making a bet with taxpayer money.

When you dismantle those subsidies while backing fossil fuels, you're still making a bet.

Both approaches are wrong.

The only rational approach is complete neutrality.

No subsidies for anyone. No mandates. No bans.

Let entrepreneurs risk their own capital. Let investors place their own bets.

The market will allocate resources far more efficiently than any central planner.

Even one as confident as Trump.

Oil went from $40 to $7 under Reagan because he let markets work.

Nobody predicted it. Nobody saw it coming.

ChatGPT created a $750 billion company and rewrote energy demand in a single day.

Nobody predicted it. Nobody saw it coming.

Trump thinks he knows what energy will look like in ten years.

He doesn't.

Nobody does.

So follow Reagan's playbook.

Get out of the way and let markets decide.

That's the only energy policy that makes sense.

Robert Kiyosaki

Editor, Money Power and Profit

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