The US is already #1 in Oil and Gas Production

Amidst the rhetoric of “drill, baby, drill” and talk of a new US oil and gas boom to be launched in the first 100 days of Donald Trump’s Inauguration as President in January, it’s important to remember that US crude oil production is already at record high levels under President Biden.

The United States are expected to be the world’s top producer of crude oil in 2024, according to the US Energy Information Administration (link) and, if so, it would be the seventh consecutive year that the USA has held the title. 

Why is this so?

At a macro level, a combination of factors is driving US energy production markets, including:  the shale revolution; technological advancements; policy support; private sector investment; and export demand.

In terms of technology, huge advances have been made in onshore US drilling and hydraulic fracturing in recent years, opening previously unrecoverable reserves. So, although individual potential upside opportunities still exist, the reality is that new drilling is more likely to be incremental than the start of a huge new wave of activity.

‘Associated gas’, that is gas which is produced alongside oil in the same wells, production is also increasing which is supporting both a growing export market (via LNG cargoes to Europe and Asia) and is also helping to support growing US electricity demand that is increasing as a function of the expansion of data centres and AI, not to mention growth in US manufacturing. 

What are the implications for the rotorcraft market?

It’s worth noting that several, proposed Trump policies are likely to affect the rotorcraft market (e.g. increased defence spending, improved tax depreciation, relaxation of ESG, etc.), but let’s focus on energy markets for now and leave the others for subsequent posts.

Over 200 rotorcraft operate offshore in the Gulf of Mexico oilfields, as our USA Offshore Rotorcraft Snapshot highlighted in April (link), the largest single country share in the world. It is an extremely well established and mature market; the first flight to a US oil platform was made by a Bell Helicopter as long ago as 1948. One could likely see increased activity in the region as this would directly support the ‘America First’ message.

In terms of global impact, higher US energy production may reduce the oil price, possibly putting pressure on the breakeven economics of deep-water exploration and production elsewhere in the world. However, to counterbalance this, we acknowledge that oil demand growth is still strong, with the latest IEA report noting (link): “World oil demand growth is set to accelerate from 840 kb/d in 2024 to 1.1 mb/d next year, lifting consumption to 103.9 mb/d in 2025. Increases in both years will be dominated by petrochemical feedstocks, while demand for transport fuels will continue to be constrained by behavioural and technological progress. While non-OECD demand growth, notably in China, has slowed markedly, emerging Asia will continue to lead gains in 2024 and 2025.”

So, whilst the overall medium-term picture is mixed, the near-term is relatively known given the inherent inertia in O&G; long lead-times for offshore O&G exploration projects mean that new schemes launched in early 2025 will take many years before production starts.

In short, it’s quite challenging to predict the exact effect of Trump, not least because of the unforecastable nature of the man himself! Let us return to this topic after the 20^th January, 2025, when things will hopefully become clearer. In the meantime, “chill, baby, chill…”