(Reuters) — The U.S. oil industry is facing significant challenges, having laid off thousands of workers and reduced billions in spending due to declining oil prices and major industry consolidation. This shift may signal the end of the rapid output growth that once positioned the U.S. as the top global producer.
In response, the Organization of the Petroleum Exporting Countries and its partners in the OPEC+ group are ramping up production to reclaim market share lost to the U.S. and other producers. On Sunday, OPEC+ announced plans to increase output by 137,000 barrels per day starting in October.
These adjustments have led to a nearly 12% decline in international oil prices this year, bringing them close to breakeven for many U.S. companies. This situation has prompted significant budget cuts and layoffs, which industry insiders warn could limit future production. Should output plateau or decline, it could weaken the U.S.’s influence in global oil markets and complicate President Donald Trump’s energy dominance agenda.
ConocoPhillips, the third largest oil producer in the U.S., recently announced it would reduce its workforce by up to 25%. This follows a similar announcement from Chevron, which plans to lay off 20% of its employees, approximately 8,000 workers. Other companies like SLB and Halliburton have also implemented workforce reductions.
A Reuters analysis indicated that 22 public U.S. oil producers—such as Occidental Petroleum, ConocoPhillips, and Diamondback Energy—have cut capital expenditures by $2 billion, although major players like Exxon and Chevron weren’t included in this assessment.
Compounding these issues, the U.S. oil rig count—a key indicator of future drilling activity—has dropped by about 69 to a total of 414 this year, according to Baker Hughes. Experts suggest that oil prices need to stabilize between $70 and $75 per barrel for drilling operations to resume effectively. Current trading for U.S. West Texas Intermediate futures was at $62.15 per barrel on Monday.
The impact on domestic employment is concerning, and analysts predict a potential reduction in production from the record high of 13.2 million barrels per day expected in 2024. Research firm Energy Aspects anticipates a decrease of 300,000 barrels per day in U.S. onshore output by 2025, while Wood Mackenzie projects a modest growth of only 200,000 barrels per day, the smallest increase since the pandemic disrupted global demand.
As of the last week of August, production from the lower 48 states of the U.S. was approximately 13.4 million barrels per day, slightly below the peak of 13.6 million reached in December of the previous year.
Idle equipment, fewer jobs
The U.S. frac spread count has dropped by 39 this year, reaching a low of 162, the lowest since February 2021. This decline correlates with the reduction of 60 rigs and 20 to 30 frac spreads in the Permian Basin over three months, indicating a likely decrease in production, according to Diamondback Energy’s CEO, Kaes Van’t Hof.
Uncertainty and volatility in the market, exacerbated by Trump’s trade policies and tariffs, have raised material costs, which will likely lead to a slow global economy and falling demand. ConocoPhillips’ CEO, Ryan Lance, highlighted that inflation and tariffs impact the industry significantly.
Diamondback warns that steel casing costs for wells could surge by nearly 25% by 2025, affecting the breakeven costs of drilling in the U.S. Operating costs now comprise 35% of total spending, up from the historical average of 20%.
Recent labor statistics indicate a decline of 4,700 oil and gas production jobs, with energy services jobs also decreasing by about 23,000. Despite improved drilling efficiencies allowing companies to maintain production with fewer rigs, analysts suggest these gains won’t be sufficient to sustain or increase production levels in onshore U.S. basins. Josh Young from Bison Interests noted that current policies are hampering drilling activities in areas with potential supply increases.
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