Texas oil drillers congratulated themselves for breaking their 1973 production record by 20 percent in 2018. They gave a shoutout to President Donald Trump for rolling back regulation on the industry.
In 2018, 1.54 billion barrels of crude were pumped, which is 277 million barrels more than the year before, and about 20 percent more than the previous record of 1.28 billion set during the 1973 oil crisis, according to the 2019 State of Energy Report by the Texas Independent Producers and Royalty Owners Association (TIPRO).
“The rollback of unnecessary and overly burdensome regulations under President Trump’s American Energy Dominance agenda has directly contributed to a more favorable regulatory environment, allowing domestic producers to increase exploration and production activity,” the report stated.
In September 2018, the Environmental Protection Agency (EPA) proposed loosening regulations on methane leaks in the oil and gas industry, which would save the industry nearly $500 million by 2025.
Based on EPA data and estimates, the relaxed rules would lead to an increase of annual greenhouse gas emissions in the United States by about 0.02 percent and increase in volatile organic compounds emissions by about 0.09 percent a year.
The Obama administration introduced the more stringent rules in 2016, saying they would help meet the greenhouse gas reduction targets set by the president.
While noting “significant progress” in rolling back Obama’s “onerous and unnecessary regulations,” the report stated the industry’s “challenges” include Trump’s import tariffs on steel and aluminum, which are “adding significant cost on a per-well basis and a punitive expense of tens of millions of dollars to some critical infrastructure projects.”
Trump imposed the tariffs to punish China for dumping the metals as well as to rejuvenate domestic production—a major national security asset. Companies that can’t get the materials they need domestically may ask for a waiver from the tariffs, though the administration had trouble clearing the massive queue of the initial waiver applications.
Thanks to the expansion of hydraulic fracking, the United States became the world’s top crude oil producer in 2018, surpassing Russia and Saudi Arabia, according to the Energy Information Administration (EIA).
“Independent oil and gas producers, who collectively drill up to 95 percent of the oil and natural gas wells in America, led the industry in this growth,” the report noted.
Besides Texas, many other oil-producing states also boosted production in 2018, notably North Dakota (384 million to 443 million barrels per day), New Mexico (169 million to 226 million), and Colorado (105 million to 152 million). Production slightly decreased in California and Louisiana, according to the report.
The EIA’s forecast for U.S. oil output, which averaged below 11 million barrels per day in 2018, will raise to nearly 15 million by 2027 and remain above 14 million through 2040 (pdf).
Though the robust U.S. production pushes oil prices down, the Saudi-led Organization of the Petroleum Exporting Countries (OPEC) in December agreed, together with Russia, to cut output by 1.2 million barrels a day to force the price back up.
“While medium-term trends pose some challenges, we still see a balanced oil supply/demand outlook this year,” Bank of America analysts said in a Feb. 14 note. “Brent [Crude] should average $70 in 2019, helped by voluntary (Saudi, Kuwait, UEA) and involuntary (Venezuela, Iran) declines in OPEC supply.”
Oil prices have somewhat stabilized since January, oscillating in the low $60s per barrel of Brent Crude, the leading benchmark. U.S. producers need the price to stay above $50 to avoid losses on less profitable wells.
“U.S. growth potential could be slowed if oil prices slide below our base case for extended periods but, as long as average prices stay above $50, positive U.S. production tendencies will persist,” Rystad analyst Artem Abramov said in a Jan. 24 statement.
Prices at American gas stations stay below the average of $2.30 per gallon of regular, according to the AAA travel membership organization. Most southern states enjoy prices around $2 per gallon.
The American oil and gas industry added more than 45,000 jobs in 2018, moving the total beyond 880,000 and closer to the record high of more than 1,050,000 jobs in 2014, the TIPRO report stated.
The average wage in the sector is nearly $131,000 in Texas, which is more than 130 percent over the average private sector wage in the state.
Nationwide, the industry pays nearly $113,000 on average—double the private sector average.
Reuters contributed to this report.