Consultancy firm East Daley Capital told Reuters on Thursday that by the end of the year, US oil production will have increased by 1.29 million barrels per day over 2021 numbers, putting total US oil production reaching 12.86 million barrels per day. That’s 23% higher, or 300,000 barrels worth, than its projections about 2022 made last December.
Most of the anticipated increase will come from new wells sunk in the Permian Basin, a large region in western Texas and southeastern New Mexico that is rich in petroleum and natural gas deposits.
However, the East Daley projections go well beyond what the US Energy Information Agency (EIA) expects to happen.
The Department of Energy subsidiary said on Tuesday that higher costs of production and labor would combine with inflation to dampen the expansion of production. The EIA anticipated only a modest increase of 0.8 million barrels per day, reaching 12.0 million barrels per day by the end of the year. The trend will continue into 2023, they said, only increasing by 0.9 million barrels per day next year.
“It’s hard to get pipe, sand, crews for drilling rigs, truck drivers,” Mike Oestmann, CEO of Tall City Exploration, a company that drills oil wells in West Texas, told the Texas Tribune on March 25. He told the Austin-based outlet that the scarcity of supplies, equipment and people “is unlike anything I’ve ever seen.”
That said, according to OilPrice.com, there were 332 drilling rigs in the Permian Basin last week - the highest count since April 2020.
Pressure has increased for the US to expand its domestic oil production since the US sanctioned Russia in late February in response to Moscow’s recognition of the Donetsk and Lugansk People’s Republics and moving military forces into the Donbass to stop escalating Ukrainian attacks. Further sanctions followed the launching of Russia’s special “neutralization” operation in Ukraine on February 24, and in early March, Biden announced a total boycott of Russian petroleum products.
According to the Wall Street Journal, citing EIA data, the US imported 8% of its oil from Russia last year, or about 672,000 barrels a day.
Brent Crude stood at $108.8 a barrel on Thursday, down from its $130 high last month, but still about 20% higher than the $91 a barrel it traded at before US sanctions. According to the American Automotive Association (AAA), the average US gas price nationwide was 4.07 a gallon on Thursday, about 12 cents cheaper than the previous week.
Rising gas prices have put new pressures on commodity prices, which had already hit a 40-year high thanks to pandemic-driven trends. To offset the trend, the US Federal Reserve increased interest rates last month and signaled it plans to do so several more times into the summer, and Biden ordered a massive release of the Strategic Petroleum Reserve. The plan calls for distributing 1 million barrels of oil from storage facilities to oil companies each day for the next six months - the largest such release in US history.