The Booming American Oil Industry

Amid the global energy transition discussions, the American oil industry continues to thrive, experiencing a surge in crude oil extraction from the shale rock formations of West Texas. Despite previous financial challenges, companies involved in horizontal drilling and hydraulic fracturing have now turned profitable, marking a significant shift in their financial performance.

Leading oil and gas companies like Exxon Mobil and Diamondback Energy are witnessing remarkable stock market performances, with some reaching record levels. The industry’s resurgence post the setbacks during the Covid-19 pandemic can be attributed to a combination of market dynamics and the impact of Russia’s conflict in Ukraine.

Notably, the sustained high prices of around $80 per barrel for U.S. oil since early 2021, compared to the previous average of $53, indicate a robust demand for oil, signaling a potentially prolonged transition to renewable energy and electric vehicles.

The success of oil companies goes beyond price increases. Responding to investor demands for improved financial performance, surviving companies from the 2020 oil-price crash have shifted away from debt-driven growth strategies that characterized the American shale industry’s initial boom.

These companies have implemented cost-cutting measures, including workforce reductions and increased automation, to boost efficiency and profitability. Since 2021, oil and gas wells across the lower 48 states have generated over $485 billion in free cash flow, a stark contrast to the decade prior when the industry operated at a net loss of nearly $140 billion.