Why is U.S. Oil Production Down?

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Why is U.S. Oil Production Down?

Why is U.S. Oil Production Down? The United States’ oil production reached an all-time high of slightly under 13 million barrels per day in the months before the Covid-19 epidemic (BPD). Demand fell as the pandemic spread, and output followed. Oil production fell by more than 3 million BPD to 9.7 million BPD by May 2020.

Demand has since increased to pre-pandemic levels. However, there has only been a limited recovery in oil output. According to the Energy Information Administration’s (EIA) most recent data, the United States currently produces 11.6 million BPD of oil, which is still 1.4 million BPD below pre-pandemic levels. The increase in oil and gasoline prices over the past year was mostly caused by this deficit.

Some oil companies went out of business in 2020 when the pandemic reduced oil demand. Given the gloomy prognosis, some tiny stripper wells. Which make up a considerable portion of U.S. oil production, were permanently capped. Some employees quit the oil sector.

Why is U.S. Oil Production Down? Now that oil prices have risen beyond $100 per barrel, many are wondering why output hasn’t fully recovered. The Biden Administration has accused the oil sector of hoarding 9,000 permits that they aren’t using. The oil sector claims that the antagonistic policies of the Biden Administration are a contributing factor to the issue.

Let’s put politics aside and discuss what is known. It is accurate to say that the oil business accumulated licenses, primarily before President Biden took office. I have previously written about this. But that does not imply that they are perched on them.

Why it’s so tough to produce more domestic oil right now?

Why is U.S. Oil Production Down? 2020’s oil glut caused petroleum prices to drop to -$38 per barrel, forcing American companies to plug wells and lay off employees. At the moment, manpower is in low supply, oilfield supplies are expensive, and both are rare.

Everyone from truckers to politicians is calling for increased domestic oil output as a result of high gas costs. Despite increased drilling, this nation’s oil production is still lower than it was three years ago. But as member station KCUR’s Frank Morris writes, it won’t be as simple to change that as some might have you believe.

Why it's so tough to produce more domestic oil right now

Oil is pricey right now, but Dick Schremmer, president of Bear Oil in the small Kansas town of Peck, claims that early in the pandemic, he could practically not give this thing out.

DICK SCHLEMMER: They charged us $38 per barrel to take our oil, which they took from us that day.

MORRIS: Naturally, no one anticipated how long the losses would continue. Furthermore, domestic production fell by 20% as small businesses went out of business or reduced their workforce. Additionally, businesses stopped operating nearly 5,000 wells in Kansas alone. In a field south of Wichita, Schremmer can be seen today standing close to one of them. Today, the oil beneath this historic pump jack is worth more than $100 per barrel.

SCHLEMMER: I believe it cost me $12,000 to install and operate this well.

Idle wells corrode, says Morris. The majority will require repairs before they can resume production. Along with the price of crude, the cost of the equipment and chemicals used to extract oil from the ground has skyrocketed.

SCHLEMMER: I recently placed an order for a new truckload of two-inch tubing from Houston, which cost me $75,000 in total. That would have cost me between $25,000 and $35,000 last year.

Why is U.S. Oil Production Down? For small business owners like Dick Schremmer, that kind of money is substantial. Hundreds of small businesses operate low-producing stripper wells in areas like Kansas, Ohio, and Texas while major corporations like ExxonMobil and BP run wells that produce hundreds or thousands of barrels per day. And according to Mickey Thompson, a former president of the Oklahoma Independent Petroleum Association, many of these businesses have a difficult time filling positions.

produce more domestic oil right now

MICKEY THOMPSON: The fact that thousands of workers were laid off during the recent recession is a major factor in why it doesn’t happen overnight. Well, the majority of them have vanished.

MORRIS: Those who are still working are working a lot of overtime.

MORRIS: Two men work to revive a 1940s-era well close to a riverbank near Oxford, Kansas. As the laborers toil in the muck, throwing hefty 4-foot-long wrenches and manhandling 200-pound sections of pipe, vile crude, smelling of skunk and diesel gasoline, sloshes out of an ancient pipe, splattering them.

SCHLEMMER: Everything is disgusting, slimy, and heavy.

MORRIS: According to Dick Schremmer, employees like these men are a dying breed.

SCHLEMMER: Working eight, ten, or twelve-hour days outside in the heat, cold, and other extreme conditions are fairly taxing. And quite a few folks simply don’t want to do that any longer.

MORRIS: It also causes several delays. 20 semi-trucks belonging to Robert Wagner, owner of Dan D Drilling in Lamont, Oklahoma, are fully equipped with the tools needed to drill new oil wells. He can only staff two of the 20 rigs, and even then, only half.

Because of this, we are unable to match the demand. ROBERT WAGNER Not just Lamont, Oklahoma, is affected. Everyone in Louisiana and Odessa is involved. They are all experiencing the same issue.

MORRIS: As a result, drilling new wells by oil corporations will have to wait. And while finance can be difficult in this region of the country, regulation is not much of a barrier. Additionally, according to Mickey Thompson, common sense should be used before there is a rush to increase production.

Because there is no assurance that the price of oil will be anywhere close to where it is today next month, THOMPSON They squander all this money, which may cause a sharp price decline.

MORRIS: Although domestic output is currently on the rise. It is still roughly 10% behind its all-time high in 2019.

MORRIS: This year, the Belle Plaine, Kansas, well that had been chugging away just beyond a lush front yard was brought back online. It now produces a meager barrel and a quarter of oil daily, enough to make roughly 25 gallons of gasoline. The domestic oil industry is expected to achieve 2019 production levels sometime in the summer of next year, according to the U.S. Department of Energy. I’m Frank Morris for NPR News.

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