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The future of the US oil industry

The future of the US oil industry

The future of the US oil industry


The United States of America (USA) is the largest oil producer globally.

By 2021, the daily oil production of the United States will be more than 11 million barrels per day.

Eleven million barrels is more than any country in the OPEC (shortened for Organization of the Petroleum Exporting Countries), including Saudi Arabia or Russia, which holds the following two places in the oil production list.

The oil industry creates 10 million jobs in the US and supports 8% of the US GDP.

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The high US oil production has kept the oil supply in check and prices at sustainable levels outside the states.

Therefore, the US oil industry is equally vital for the US and the rest of the world. So it is interesting to look into the future of the US oil industry.

US oil consumption

The US is also the largest oil consumer in the world. It is heavily dependent on oil and natural gas.

According to US Energy Information Administration (EIA), by 2020, 34.7% of all energy consumption came from oil, and 33.9% came from gas.

Together, these two account for more than two-thirds of the country’s total energy consumption.

Oil provides energy in the transportation and manufacturing sectors, while gas provides energy for heating, manufacturing, and electricity generation.

These numbers show the US economy’s dependency on oil and gas

The US is a net oil exporter, but it still imports around 7 million barrels per day of oil from several countries.

The oil imports have gradually gone down over the past 15 years from 10 million barrels in 2005 to 7 million barrels by 2019.

Today the largest oil importer to the US is its neighbouring Canada. The import buffer is a promising fact for the US oil industry.

It shows that even if the demand goes down drastically, the domestic oil producers can still produce at the current levels to cater to that demand.

History of the US oil industry

The history of the US oil industry runs back to the days of the first European settlers. When the first settlers came, they found oil seeps in several states.

Then oil was again found by the early 1800s when people started digging salt wells. Initially, this was a nuisance as oil seeped into salt wells, contaminating them.

But as time went by, the salt miners started using this oil in their mining camps or selling the excess oil. The first commercial oil well began operating in the year 1859 in Pennsylvania.

Today the largest oil-producing state in the US is Texas, and the Texan oil industry dates back to the year 1894.

The main oilfield in Texas is the Permian basin which it shares with the neighbouring New Mexico.

Other leading oil-producing states are North Dakota, Oklahoma, Alaska, Colorado, and California.

One of the most important discoveries in the US oil industry is the technology known as hydraulic fracturing, or ‘fracking.’

This technology is used on shale rock to release its natural gas and oil deposits.

When fracking, a vertical line is drilled up to the shale rock layer and then drilled horizontally within the rock.

Then small hairline cracks are created in the rock. Once the cracks appear within the shale rock layer, a water and sand mixture is sent to extract the trapped oil into this drilled network.

Today around 90% of the US oil wells use fracking technology

It is directly responsible for the significant increase in US oil production since 2007, even though fracking first began almost six decades ago.

However, the downside to fracking is that it is relatively expensive, making the US oil industry more sensitive to the price fluctuations in the global markets.

Effects of the pandemic

The year 2019 had been the best year for the US oil industry, where the oil production averaged 12.3 million barrels per day.

By November 2019, the production peaked at an all-time high at 12.9 million barrels per day. Then the Covid-19 pandemic happened.

By the end of the first quarter of 2020, the world economy came to a grinding halt as most major economies completely shut down with nationwide lockdowns.

The oil demand dropped drastically, and oil prices in the futures markets went negative in April 2020.

This was the only time the oil prices ever went negative in history.

As mentioned in the earlier section, the US oil industry depends mainly on fracking, which is relatively expensive than oil-producing techniques used in other crude oil-producing nations such as the middle east.

So, the dropping oil prices hurt the US oil industry more than anywhere else in the world. Many oil rigs were closed down, and oil workers had to leave their jobs.

The records show that more than 100,000 people lost their jobs during the pandemic’s peak.

Recent price movements

As the global economy reopened following the pandemic, oil demand steadily rose. After the worst price drops by April 2020, oil prices steadily reached around $66 per barrel by March 2021.

During the rest of 2021, oil prices fluctuated between the high 80’s and low 60’s. Oil prices did not go below $60 after May 2021.

By January 2022, Brent oil prices almost reached $90 per barrel, the highest it reached since 2014.

The past year had been favourable for the US oil market, and oil production increased.

With increasing prices, rigs started to reopen, and the US oil rig count has gone up steadily for 18 months straight up to now.

And as the prices are showing no sign of slowing down, the rig count is expected to go higher in the near future.

US Oil production forecasts

The industry forecasters now believe that the US oil production will surpass the pre-pandemic production peak by reaching 12.4 million barrels per day in 2023.

If these predictions come true, it will be a promising period for the US oil industry. According to forecasts, the Brent oil price will remain around $75 in 2022 and drop slightly to about $68 by 2023.

Over the long-time span, oil demand will increase up to 2030. Afterward, with the increased use of electric vehicles and alternative energy sources for manufacturing, the market is expected to go down gradually.

However, it is difficult to predict the long-term price action, especially when considering the rising inflation and increased money supply worldwide.

Environmental concerns

President Biden has pledged to increase alternative energy sources and cut down on carbon emissions.

But with the effects of the pandemic and the way the economy is struggling to get back on its feet, it is now widely speculated that the president will not be able to go ahead with his green energy mandate at least within the first term in office.

Environmentalists have always remained hostile toward the oil industry. However, there is no denying that oil is still a lesser threat to the environment than coal.

With the increase in US oil production thanks to fracking, the US has cut down on the carbon emissions caused by coal burning.

Another primary environmental concern related to the oil industry is the release of methane during oil production.

However, now most oil companies take measures to prevent the release of methane into the atmosphere.

Environmentalists are also vocal regarding the high amount of water used in fracking. And some believe that it can lead to ground tremors and induced earth quicks.

However, the health and earthquake concerns do not have solid evidence to back them, and the economic impact of the US oil industry can easily outweigh the negative impact it is causing on the environment.

And with the mounting pressure from their own investors, oil companies are increasing their policies towards a greener output.

Economic and political concerns

With rising inflation around the world oil industry is faced with multiple challenges. Stock markets around the world are expecting a significant crash as well.

While it is impossible to time a market crash and predict its impact on commodity markets, the publicly trading oil companies are concerned.

And many giants in the industry have resorted to stock buybacks and increased dividends to cushion against any future downturn.

Another primary concern is the world’s geopolitical situation, with rising tensions in Ukraine and Taiwan.

With the Russian troops mobilizing along the Ukraine border, neighbouring countries are expecting a war, and all eyes are now on the US as to how it will respond to the crisis.

At the same time, the Chinese government has been openly hostile towards Taiwan for years now, and it may very well exploit the developments around Ukraine to make a military move on the Taiwanese front.

Oil prices have always fluctuated drastically during global crises. The US oil industry will not wish for another slump in costs as it is only now recovering from the worst ever price correct just a year earlier.


To summarize, the USA is the largest oil producer and oil consumer globally. The global oil demand will increase up to the year 2030. And US oil deposits can easily last for another century.

After the major setback in 2020 following the pandemic, the US oil industry is experiencing a boom amidst favourable oil prices.

And the oil production will surpass the pre-pandemic peak by 2023.

However, the industry is facing new uncertainties over the geopolitical and economic tensions in the world and mounting pressure from environmentalists.


In conclusion, the future of the US oil industry looks promising. Global and domestic demand will keep rising, and the oil prices will remain high, at least within the immediate future.

Now more people get employed, and more rigs are opening to expand production. The US will remain the largest oil producer for the foreseeable future.

And with the resilience it showed during the Covid-19 pandemic, the US oil industry will have what it takes to support the growth of the US economy for decades to come.

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