Oil prices are rising again due to the war with Iran. But even when oil prices fell after 2022, oil production in the U.S. rapidly expanded, due to innovation and technological advances.“The US is producing record quantities of crude, even as oil prices drop. Thanks to technical improvements like remote monitoring and more efficient wells, as well as industry consolidation, drillers are pumping more oil out of the ground with fewer rigs and crews, reinforcing the industry against low prices and global competition,” reported The Doomslayer.
In February, the Wall Street Journal reported:
As U.S. oil prices dropped below $60 a barrel in recent months, the industry shed rigs by the dozens and laid off crews that frack wells. Yet, the country’s wells last year gushed a record 13.6 million barrels of crude on average each day—100,000 barrels more than the Energy Information Administration, the federal forecaster, had anticipated before President Trump’s inauguration. The disconnect between slackening activity and the increasing yield has mystified even oil chieftains…
Executives credit the outperformance in part to companies’ engineering prowess and the changing makeup of the industry. Oil giants now have a bigger share of crude production in their hands and are largely impervious to price swings, ensuring a steady output. Among other field enhancements, these companies now routinely drill wells that extend over 4 miles and allow them to collect more crude at a lower cost…
One explanation for the basin’s resilience is that the unruly, debt-fueled frackers that would retreat when prices fell have died off. They have given way to giants armed with sturdy balance sheets that can better weather price shocks. The Permian has seen a consolidation frenzy valued at more than $125 billion since 2020. As a result, drillers such as Exxon Mobil, Chevron, ConocoPhillips, Diamondback and Occidental Petroleum now largely dictate the pace of production there.
In an effort to trim costs, these companies have been deploying drilling and pumping innovations across their respective empires. For instance, Chevron in 2019 ran 21 rigs and five frack crews in the Permian. This year it anticipates it will need only six rigs and two frack crews to produce about 67% more oil-and-gas in the region than seven years ago.
Each rig on average drills 1,500 feet a day, which is more than twice as much as in 2019.
Chevron and others are also trying their hand at drilling horizontal wells that extend out 2 miles, make a 180-degree turn and extend for another 2 miles in a U shape. This allows them to extract more crude from smaller pieces of land where they can’t drill one long lateral section.
Earlier, Bloomberg News reported that petroleum had become the “most productive” U.S. industry, noting that recent improvements had
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. Investors were fleeing the sector just a few years ago, betting on the green transition as a global oil glut weighed on producers. But 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.
