U.S. shale producers could still increase production even if oil prices drop to $50 per barrel, thanks to ongoing innovations and improvements in efficiency, U.S. Energy Secretary Chris Wright told the Financial Times.
Wright, who previously led the fracking company Liberty Energy, said the shale industry can endure a lower price for oil. He explained that new supply will likely push prices down further, but companies will innovate to lower costs, and both consumers and suppliers will adjust accordingly.
His outlook contrasts with that of many analysts and even some U.S. oil producers, who are less optimistic about the sector’s ability to thrive at lower prices.
U.S. oil companies, especially large publicly traded ones, indicated early on that there wouldn’t be a major production boom despite the regulatory changes brought by the Trump administration. While President Donald Trump promised to cut energy costs for Americans and urged OPEC+ and Saudi Arabia to lower oil prices, he also called for increased domestic oil production.
On his first day in office, Trump signed an executive order to ease restrictions on oil and gas production and to revoke climate-related policies set by President Biden. The industry welcomed these moves, but companies were not eager to dramatically boost production.
The shift in the shale business has been driven by producers’ focus on returning more money to shareholders, rather than aggressively expanding output. The consolidation of smaller producers through mergers and acquisitions has made larger companies even bigger. As a result, large public companies are now prioritizing investor returns over constant drilling.
“We’re not going to see anybody in ‘drill, baby, drill’ mode,” said Liam Mallon, President of ExxonMobil’s Upstream division, in November.
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