As international oil prices surged due to the Iran war and the blockade of the Strait of Hormuz, the U.S. oil industry has returned to ramping up production. Some say the slogan "Drill, baby, drill," which U.S. President Donald Trump shouted during the election, is belatedly becoming reality. However, within the industry, the prevailing view is that the "high oil price boom" created by the Middle East war is a bigger driver than the White House's pro-fossil fuel policy.
Le Monde reported on the 27th (local time) that U.S. oil majors have recently accelerated the development of new wells. According to energy services company Baker Hughes, the number of operating oil rigs in the United States increased by 18 this month to 425. That reverses a trend that had been virtually flat at around 410 earlier this year. Most of the drilling expansion is concentrated in the Permian Basin in Texas. The Permian, the largest U.S. shale oil producing area, continues to be developed through hydraulic fracturing despite environmental controversy.
According to the U.S. Energy Information Administration (EIA), U.S. crude oil production has risen to 13.7 million barrels a day. That is about 300,000 barrels higher than the same period last year. Le Monde said the increase itself is not large, but the significance is not small. Only a few months ago, the EIA projected that U.S. output would gradually decline, saying international oil prices were not sufficiently attractive for producers. But the EIA now expects U.S. crude output to hit a record high of 14.2 million barrels a day in 2027.
The backdrop is a spike in oil prices caused by war. Since the Iran war effectively shut the Strait of Hormuz, international oil prices have jumped about 50% this year. Rystad Energy estimates that if international oil prices stay around $100 a barrel, major U.S. oil corporations will reap an additional $63 billion (about 94.7394 trillion won) in profit compared with expectations at the start of the year. On top of that, the outlook that "disruptions in Middle East supply will be hard to end quickly" is prompting corporations to resume aggressive investment.
In fact, a Dallas Federal Reserve survey shows the breakeven for new shale drilling in the U.S. industry is about $66 a barrel, and current prices are well above that. According to energy analytics firm Enverus, U.S.-listed shale companies have increased capital spending plans by about $490 million (about 737.3 billion won) so far this year.
Still, there are voices inside the industry warning against excessive optimism. Tommy Inglesby of consulting firm Oliver Wyman said in an interview with Le Monde, "This push to increase output is more likely to be limited than explosive," adding, "Corporations do not want to mistake a short-term war premium for a long-term trend." If international oil prices suddenly fall, the investments ramped up aggressively could become a burden.
Ironically, President Trump also wants lower oil prices. That is to reduce U.S. household burdens by lowering gasoline prices. During the election, Trump mentioned an oil price level of $50 a barrel several times.
Experts say the real shift this time lies in "export expansion" rather than simple output increases. With Middle Eastern crude supplies blocked by the Strait of Hormuz closure, U.S. refiners are drawing down inventories and boosting utilization to fill the gap in the global market. U.S. exports of crude and refined products currently stand at about 13.1 million barrels a day, up 30% from last year. Crude exports are 5.5 million barrels a day, and refined products such as gasoline and diesel are 7.6 million barrels. All are at record highs.
Of course, increased U.S. output alone is not enough to fill the 10 million to 12 million barrels a day supply gap created by the Iran war. Still, some say the United States has begun to move beyond being merely the world's largest oil producer to take on the role of the global energy market's "supplier of last resort."