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U.S. crude oil production is expected to average 12.4 million barrels per day in 2023, surpassing the previous record of 12.3 million barrels per day in 2019. These forecasts, offered by the U.S. Energy Information Administration, include increased production in the Permian region and the Federal Offshore Gulf of Mexico.[1]

The U.S. is on track to recover all the decreases in production that occurred during the Covid-19 pandemic, when demand for oil collapsed along with its price. The low price of oil caused energy companies to slow production and close their least profitable wells, resulting in an 8% drop in oil production for 2020, the highest annual decrease on record. Following the easing of travel restrictions and a rebound of global demand, U.S. oil output is close to surpassing pre-pandemic levels. [2]

Permian and Gulf of Mexico Regions Drive Growth

The bulk of the growth in U.S. oil production has come from the Permian region, which spans parts of Texas and New Mexico and accounts for about 40% of U.S. oil output and currently produces 5.7 million barrels per day. The other major source of growth is the Federal Offshore Gulf of Mexico, where several large projects have come online in the past few years, producing 1.8 million barrels per day.[3][4]

The EIA’s projections assume that oil prices will remain above $60 per barrel through 2023, which would provide sufficient cash flow and incentives for U.S. producers to invest in new wells and technologies. However, the EIA also cautions that there are significant uncertainties and risks that could affect its outlook, such as the pace of global economic recovery, the level of compliance with OPEC+ production cuts, and the impact of environmental regulations and social pressures on the oil industry.[5]

President Biden Approves New Drilling Projects

In addition to boosting domestic production, the U.S. is expanding its access to new oil resources in Alaska and the Gulf of Mexico. In March 2023, the Biden administration approved a controversial drilling project in the National Petroleum Reserve-Alaska, known as Willow. The project, initiated under former President Trump and faced legal challenges from environmental groups, is expected to produce up to 160,000 barrels per day of oil at its peak and generate $10 billion in revenue for the federal government over 30 years.[6][7]

A few weeks later, the Biden administration announced plans to hold an auction for a lease sale of more than 73 million acres in the Gulf of Mexico, which could yield up to 1.1 billion barrels of oil and 4 trillion cubic feet of natural gas over the project’s lifetime. The auction, which was initially scheduled for November 2020 but was delayed by the pandemic, is part of a deal that Biden struck with Senator Joe Manchin, a moderate Democrat from West Virginia who demanded more support for fossil fuels in exchange for his vote on the $1.9 trillion Inflation Reduction Act.[8]

These moves have raised questions about whether Biden is shifting his stance on oil and gas development, which he pledged to limit during his campaign as part of his plan to combat climate change. Biden has already canceled the Keystone XL pipeline, paused new leasing on federal lands and waters, and rejoined the Paris Agreement on climate change.[9]

However, some argue that Biden is simply balancing his environmental goals with his political realities as he faces pressure from both sides of his party. They also point out that Biden’s actions are unlikely to significantly impact U.S. oil production or global emissions in the short term, as most of his newly issued leases are for areas that have already been explored or developed.[10]

Leveraging Oil Production for Geopolitical Influence

One of the geopolitical factors to consider is the ongoing war between Russia and Ukraine, which has escalated since late February 2022. Russia is one of the key members of OPEC+ and a major oil producer and exporter.

Oil prices have steadily fallen since Russia invaded Ukraine. Lower oil prices mean lower income for Russia, which could affect its military spending and ability to sustain its troops and equipment.

Lower oil prices could also undermine Russia’s geopolitical influence and leverage over other countries, especially in Europe and Asia. Russia has been using oil and gas as a tool of coercion and intimidation, cutting off supplies or offering discounts to gain favor or concessions. However, with lower oil prices, Russia’s customers have more options and bargaining power, and can seek alternative sources of energy.[11]

The United States’ growth in oil production may have a secondary effect of reducing Russia’s power. The U.S. is also trying to counteract Russia’s oil production by imposing sanctions and supporting other producers. The U.S. has banned Russian oil imports and has encouraged its allies in Europe and elsewhere to do the same. [12]

Record Oil Output Amid Climate Goals

The U.S.’s return to record oil production may seem at odds with its climate ambitions. Still, this robust comeback also highlights the nation’s resilience and adaptability in a volatile and ever-changing global energy market. American oil producers have consistently demonstrated an ability to weather the storms of geopolitical tensions, economic fluctuations, and industry disruptors. Whether the U.S. can maintain its leadership position while transitioning to a low-carbon economy remains to be seen.

Written by: Kristopher Jones, CFA

  1. S. Energy Information Administration – EIA – Independent Statistics and Analysis
  2. S. Energy Information Administration – EIA – Independent Statistics and Analysis
  3. pdf (eia.gov)
  4. Federal Offshore–Gulf of Mexico Field Production of Crude Oil (Thousand Barrels per Day) (eia.gov)
  5. – Production – Amid uncertainty, the United States continues to be an important global supplier of crude oil and natural gas – U.S. Energy Information Administration (EIA)
  6. Willow Project: Biden administration approves Alaska oil project | CNN Politics
  7. Association of Industry Analytics – The Willow Project (aia-global.org)
  8. Biden administration sells oil and gas leases in the Gulf of Mexico : NPR
  9. Biden Cancels Keystone XL Pipeline and Rejoins Paris Climate Agreement – The New York Times (nytimes.com)
  10. How Biden’s oil policies upset both oil companies and environmentalists – Washington Post
  11. The story behind the proposed price cap on Russian oil (brookings.edu)
  12. S. Eyeing Russian Energy Sanctions Over Ukraine War, Officials Say – The New York Times (nytimes.com)


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