The days of exponential growth in U.S. oil supply from before the pandemic are over, as capital discipline, returns to shareholders, supply-chain bottlenecks, cost inflation, and lower well production combine to hold back production increases.
During the 2010s, the shale industry boomed as companies drilled all they could – often beyond their means – to boost production. U.S. oil supply was growing so quickly that America was often referred to as the new swing producer on the market, capable of ramping up output quickly when global oil prices and demand were rising.
The post-Covid reality is quite different—U.S. shale production is recovering, but at a slow pace, and output hasn’t reached the record levels from late 2019 and early 2020.
“The plateau is on the horizon”
The U.S. Energy Information Administration estimates in its latest Short-Term Energy Outlook (STEO) from this week that U.S. crude oil production would rise from 11.88 million barrels per day (bpd) in 2022 to 12.44 million bpd this year.
The expected growth of 560,000 bpd year over year is half the pre-pandemic growth pace. For several years, U.S. oil production rose by more than 1 million bpd every year to 2019.
U.S. oil executives also expect just 500,000 bpd growth this year, some said at the CERAWeek energy conference in Houston this week.
Growth is set to further slow in 2024, with production seen to average 12.63 million bpd next year, per EIA estimates. That’s less than 200,000-bpd growth from the estimated average level for 2023.
“The plateau is on the horizon,” ConocoPhillips’ CEO Ryan Lance said at CERAWeek, as carried by the Financial Times.
The U.S. oil industry is now prioritizing shareholder returns, despite criticism from the White House. Faster depletion rates at many wells combine with labor and supply chain hurdles to hold back growth.
Chevron, for example, flagged at its investor day last week that it fell short of its performance targets in the Delaware basin in (…)