The new mantra among frackers: “Discipline” to not trigger another oil-price collapse through overproduction. Drill Baby Drill, but not too fast.
By Wolf Richter for WOLF STREET.
Crude oil production in the US rose by 2.5% in 2024, and by 165% since 2008, to a record 13.3 million barrels per day (MMb/d), according to EIA data.
By 2007, fracking started to ramp up on a large scale. In 2018, the US became the largest crude oil producer in the world. By 2020, the US became a net exporter of crude oil and petroleum products on an annual basis, exporting more than importing.
US oil production rejiggered the global energy dynamics, including the advantages of relatively cheap and reliable energy in the US for transportation and commercial uses, and as feedstock for the huge US petrochemical industry. The two kinks in the chart in 2016 and then again in 2020 and 2021 were the results of Oil Bust 1 and Oil Bust 2 when overproduction caused the price of US crude oil to collapse, and hundreds of oil-and-gas drillers filed for bankruptcy.
Trying to not trigger another oil-price collapse through overproduction.
Currently, the mantra in the oil and gas industry is “discipline”: keep production growth at a pace that doesn’t collapse the price of oil again. They have learned the hard way twice in recent years, and they don’t want to relearn the hard way again, that overproduction causes the price to collapse.
They did it twice already: Leading to the 2014-2017 oil bust, when WTI plunged below $50 a barrel and stayed there, at one point hitting $26, and hundreds of oil-and-gas drillers filed for bankruptcy; and then again, leading to the 2019-2021 oil bust, when dozens of the survivors filed for bankruptcy, including three biggies, Diamond Offshore, McDermott, and Chesapeake.
Fracking is very profitable at current prices of around $70 per barrel of WTI. But the last two times WTI was selling for half that, oil-and-gas investors were massacred. There are many frackers, and each would benefit from maximizing production, but if they all do it, they’ll collapse the price, driving each other out of business. Hence “discipline” in production to not trigger another oil price collapse and Oil Bust 3.
Surging exports, falling imports.
Exports of crude oil and petroleum products rose by 5.4% in 2024, to a record 10.8 MMb/d (red line in the chart below).
Imports declined to 8.4 MMb/d, far below the levels in the prior decades, which had peaked at nearly 14 MMb/d in 2005 (blue line).
In 2020, when the red line rose above the blue line for the first time, the US became a net exporter of crude oil and petroleum products, exporting more than importing:
Imports from Saudi Arabia dropped to just 0.34 MMb/d in 2024, the lowest since 1986, and down from the 1.5 MMb/d range before fracking took off on a large scale (blue in the chart below).
Imports from OPEC dipped to 1.3 MMb/d, down from 5-6 MMb/d in the years before fracking took off (red).
Imports from Russia dropped to zero in mid-2022 and stayed there in 2023 and 2024. At the peak in 2001, the US imported 0.67 MMb/d from Russia (dotted green).
Imports from Canada rose to a record of 4.66 MMb/d, accounting for 55% of total US imports of crude oil and petroleum products.
Imports from Mexico fell to 0.62 MMb/d, the lowest since 1981.
Combined, Canada and Mexico accounted for 63% of total imports of crude oil and petroleum products:
Exports of petroleum products.
Crude oil accounted for 38% of exports, and petroleum products accounted for 62% of exports.
Exports of crude oil rose by 1% in 2024, to 4.1 MMb/d.
Exports of petroleum products jumped by 8.3% to 6.7 MMb/d. Included are 2.3 MMb/d of finished motor gasoline, distillate (such as diesel), and jet fuel.
Refineries in “oil island” California, for example, are not connected to US producing regions via pipelines. California produces some of its own crude oil, and imports crude oil from Alaska and foreign countries. But it’s also a large exporter of gasoline, distillate, and jet fuel, mostly to Latin America. The West Coast (PADD 5) exported 0.42 MMb/d to other countries in 2024.
Importing crude oil, refining it, and exporting the value-added product is a huge profitable business for refiners in the US, particularly on the Gulf Coast, which explains in part why the US imports crude oil: refiners sell the refined products to foreign customers.
Among the many petroleum products that the US exports are finished petroleum products, of which the US exported 2.9 MMb/d in 2024:
- Distillate: 1.30 MMb/d
- Gasoline: 0.81 MMb/d
- Jet fuel: 0.21 MMb/d
- Petroleum coke: 0.59 MMb/d
Exports of hydrocarbon gas liquids – mainly propane, ethane, butane, and natural gasoline – soared by 9.0% to 2.9 MMb/d in 2024, up from near zero in 2008, an astounding export boom:
Refilling the Strategic Petroleum Reserve has halted.
The first Trump administration started releasing crude oil from the Strategic Petroleum Reserve at the beginning of 2017. Then the Biden administration released a large portion from mid-2022 through June 2023 to push down the price of crude oil that had spiked to over $100 a barrel.
Refilling the SPR started in August 2023.
But over the last three reporting weeks in February, the SPR level remained the same, as refilling halted, possibly due to efforts by the Trump administration to allow the price of crude oil to drift lower, to push down overall inflation.
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