Why US Oil Companies Are Holding Off on Drilling New Wells
‘Oil companies are hesitant to make such big investments over what may be a temporary price spike,’ economist Paul Mueller said.
The war in Iran, which continues to trap about one-fifth of the world’s oil supply in the Persian Gulf, is seen by many as a golden opportunity for American oil companies to expand their position as the world’s leading energy producers.
“We’re seeing a combination of trying to reopen the Strait [of Hormuz] while simultaneously recognizing that there are going to be alternative routes to get oil and gas to market, including expanding production in new places and expanding production in the United States,” Caleb Jasso, policy expert at the Institute for Energy Research, told The Epoch Times. “The world as a whole is really reevaluating global energy supply chains and the need for a greater level of diversification.”
Thus far, however, America’s oil industry has remained cautious, holding off on major new investments and focusing instead on increasing output from existing wells. The combined number of oil and gas rigs operating in the United States declined from more than 700 in May 2023 to 558 today, according to Baker Hughes, an industry analytics firm.
And while the oil rig count has increased from 410 at the beginning of this year to 429 as of May 29, most producers remain reluctant to pour significant money into new wells.
“Operators are getting more barrels out of the rigs they already have through longer laterals—some wells now exceed three miles horizontally—better completion designs, simul-frac and trimul-frac operations [developing multiple wells in a single fracking operation], and AI-driven targeting,” Jason Isaac, CEO of the American Energy Institute, told The Epoch Times. “That efficiency curve is the only reason production is holding near records while the rig count keeps drifting lower.”
For all their hesitation to invest, however, U.S. oil companies are still producing at record levels, with output rising from about 5 million barrels of oil per day in 2010 to nearly 14 million barrels today, largely due to fracking technology.
Jason Isaac, CEO of the American Energy Institute, calls this “a strategic gift to the country” and “the single biggest reason this Hormuz crisis has not produced $200 oil and gasoline lines.
Read more...
