Oil Was Written Off. Now It’s the Most Productive US Industry

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, according to BloombergNEF.  Lower crude prices—which energy companies can still profit from, thanks to higher efficiencies—feed through to other industries.   “Efficiency gains help keep the US competitive as the resource base degrades over time,” says Raoul LeBlanc, vice president for North American unconventionals at S&P Global Commodity Insights. “But in the end, geology always wins.” Even though the shale revolution is now 15 years old, its success has yet to be replicated outside the US, where geology, property rights and available capital combine to make it possible. Higher levels of productivity across all sectors could add $10 trillion to US gross domestic product from 2023 to 2030, according to a McKinsey Global Institute analysis. Productivity in the oil and gas extraction sector almost tripled in the 10 years ending in 2022, compared with a near-doubling in some tech-driven industries. America’s oil resurgence over the past decade was a different kind of technological breakthrough, the combination of drilling horizontally through layers of shale and then fracturing, or fracking, the rock with blasts of water, sand and chemicals to extract hydrocarbons. But shale drilling was initially thought to cost more and be geologically more limited over the long term than drilling the free-flowing reservoirs of the Middle East. Output from US basins like the Permian of West Texas and southeastern New Mexico was expected to run out of steam as producers exhausted well locations and faced rising costs. “We’re getting more efficient in everything we’re doing” in the Permian, says Chevron Corp. Chief Executive Officer Mike Wirth. “We’re getting more for every dollar we spend, applying new technologies.” Chevron has doubled production in the Permian to nearly 1 million barrels a day just in the past five years, without making any significant acquisitions. Operators continue to improve the fracking process. That includes drilling longer wells and releasing the water at half the rate, reducing friction that can slow the process and waste horsepower. Explorers are now drilling 4-mile (6.4-kilometer) wells horizontally through layers of shale, up from 3 miles only a year or two ago. Industry consolidation is aiding the trend. Producers, by buying companies with neighboring acreage, are gaining access to larger swaths of land into which they can drill lengthier wells.

As crude prices slid in July through September, in part because of faltering demand in China, it was OPEC that was forced to give way, not US shale. The cartel delayed plans to restore long-curtailed production as American drillers carried on increasing output.

“The one thing that’s been remarkable is the persistent productivity gain that we’ve seen, particularly in the oil and gas space,” says Ken Medlock, senior director of Rice University’s Center for Energy Studies at the Baker Institute for Public Policy in Houston. “If you go back to 2012, there were books written about how shale is going to be a flash in the pan, it’s going to go away, and here we are 11 to 12 years later, and it hasn’t gone away—it still keeps growing.” NN: Add to the astonishing production gains Trumps drill baby drill and $35 WTI here we come. And its a proven fact we know how to cash in BIG TIME!