Twenty years ago, people wrongly wrote off the oil industry as a dinosaur. Oil production fell after 1970, so people wrongly predicted that oil production would continue to fall ever thereafter — the “peak oil” theory. Based on this prediction, there was even a weekly newspaper column called “peak oil“, written by Tom Whipple, the husband of Democratic politician Mary Margaret Whipple.
But then the fracking revolution came, and oil production boomed. The “peak oil theory was effectively falsified when United States oil production began to increase in 2009 and surpassed the 1970 peak in 2018.”
Technological change has continued to expand oil production in the U.S., making America the world’s biggest oil producer by a substantial margin. “Oil Was Written Off. Now It’s the Most Productive U.S. Industry,” reports Bloomberg News:
In a dusty swath of sagebrush country near the Texas-New Mexico border, engineers at oil producer Matador Resources Co. encountered a problem.
Conventional wisdom called for drilling four wells into the ground and then horizontally to access layers of oil-soaked rock, a technical feat perfected by the US shale industry. But the plot of land was too narrow, limiting each well’s reach and likely making them unprofitable. So the engineers tried a novel concept: a U-turn. After boring vertically to the shale layer, they went sideways for one mile, curved the well around and then drilled back to where it began. It worked. Matador was able to pump the oil with two wells instead of four, essentially cutting costs in half…
The U-turn, or horseshoe well, is an example of the small improvements that together have pushed oil and gas producers to the biggest labor productivity gains of any US sector over the past decade—including even tech-related industries, which have historically ranked first. The nation’s crude output has risen to a record 13.3 million barrels a day, 48% more than Saudi Arabia. All with less than a third of the rigs and far fewer workers than were needed 10 years ago.
America’s oil industry has gone from being an outsider in the world’s crude market to stealing market share from OPEC, turning the US into a net exporter of petroleum and becoming an engine of the economy….the iterative process of drilling thousands of wells each year—and learning from each one—has been a major reason for US productivity gains after years of tepid growth. US oil production will grow by 600,000 barrels a day in 2025, about 50% more than this year’s growth, due to higher well productivity.
