US Oil and Gas Drilling 9-2-25

AI Overview

No, U.S. oil and gas drilling did not see an increase in 2025; instead, drilling activity has been slowing and is near four-year lows due to declining oil prices, increased competition from OPEC+ supplies, and concerns about market volatility and future demand, leading the EIA to cut its 2025 crude oil production growth forecast. While some activity was noted in Q1 2025, overall trends point to a decrease in the number of active drilling rigs and fewer wells being drilled.  

Key Indicators of a Decline in Drilling

Slowing Production Growth: The U.S. Energy Information Administration (EIA) revised its 2025 crude oil output growth forecast downward, citing choppy oil prices and limited drilling. 

Declining Rig Counts: The number of active drilling rigs has fallen significantly, reaching near four-year lows by mid-2025. 

Lower Production Forecasts: The EIA expects U.S. crude oil production to decline from its 2025 high point through the end of 2026. 

Reduced Well Completions: Operators have been drawing down their inventories of pre-drilled, uncompleted wells, suggesting a slowdown in the process of bringing new wells online. 

Increased Industry Pessimism: A Dallas Fed survey in July 2025 showed that a majority of energy executives expected to drill fewer wells in 2025 than they had initially planned. 

Contributing Factors to the Slowdown

Falling Commodity Prices: Declining oil prices have made some wells unprofitable, keeping drillers on the sidelines.

Market Uncertainty: Factors like increased OPEC+ supplies and concerns about global demand, potentially including effects from U.S. tariffs, have created significant market uncertainty. 

Competition: OPEC+ members increasing production adds to a potential supply glut, putting more pressure on U.S. producers. 

Degradation of Well Productivity: In key basins like the Permian, wells are becoming less productive, increasing costs and making it harder to maintain output despite technological improvements. 

Future Outlook

Flat Production in 2026: The EIA projects U.S. crude oil production to remain relatively flat in 2026, and potentially even fall, if rig counts do not recover. 

Focus on LNG Exports: Growth in natural gas production is expected, supported by increasing exports of liquefied natural gas (LNG). 

Potential for Policy Shifts: Factors like federal policies, regulations, and court rulings could impact future production, though the EIA's current forecasts are based on market and policy conditions from late 2024. 

Reports for 2025 indicate a likely slowdown in U.S. oil and gas drilling, despite continued high production levels. The decline is driven primarily by cautious investment from producers amid lower oil prices and ample supply, though natural gas drilling is expected to increase to meet new liquefied natural gas (LNG) export demand. 

Oil drilling

·       Declining rig count: The U.S. oil rig count has seen a prolonged downward trend through 2025, reaching a three-year low in June. For the week ending August 22, 2025, the U.S. active oil rig count was 411, down significantly from 585 at the end of 2024.

·       Operator sentiment: A June 2025 survey by the Federal Reserve Bank of Dallas found that almost half of exploration and production (E&P) executives planned to drill fewer wells than previously expected. This cautious sentiment is more pronounced among large E&P firms.

·       Lower prices: Weaker oil prices are a major headwind for increased drilling. In mid-2025, the U.S. Energy Information Administration (EIA) forecast crude oil prices to decline through 2025 and 2026, which would disincentivize drilling.

·       Focus on efficiency: Operators are maintaining high output by focusing on well productivity and exploiting already drilled but uncompleted (DUC) wells, rather than aggressively adding new rigs. 

Natural gas drilling

·       Rebounding activity: In contrast to oil, natural gas drilling is projected to increase through 2025 and 2026. This follows weak prices and reduced activity in 2024.

·       Demand from LNG exports: A major driver for increased gas drilling is the demand from new LNG export projects coming online. The EIA projects increased production in regions like the Haynesville shale to supply this rising demand.

·       Potential policy changes: Upcoming LNG export facilities and potential policy shifts under a new presidential administration could further boost gas drilling activity by the end of 2025.

·       Data center demand: A massive buildout of data centers is also driving growth in electricity demand, which is expected to be partially met by new natural gas-fired power generation. 

Key takeaways for 2025

·       Slower oil drilling: The oil sector is prioritizing returns and efficiency over expansion, leading to a reduced rig count. Any significant increase in oil drilling is unlikely, especially with downward pressure on oil prices.

·       Rising gas drilling: The outlook for gas drilling is more positive, driven by the strong, long-term demand growth from LNG exports and data centers.

·       Overall slowdown in rig count: Despite the increase in gas-focused drilling, the overall trend for the U.S. rig count in 2025 is downward due to the more pronounced decline in oil drilling. 

https://www.google.com/search?q=us+increase+in+oil+and+gas+drilling+2025

For the first half of 2025, the average price for a gallon of U.S. regular gasoline was around $3.07 in January, rising slightly to about $3.15 by July. These figures are based on data from the U.S. Energy Information Administration (EIA) and show a general trend of stability with a slight increase into the summer. 

Monthly U.S. Regular Gasoline Prices (approximate): 

·       January 2025: $3.076 (EIA)

·       February 2025: $3.12 (LendingTree, based on EIA data)

·       March 2025: $3.10 (BTS, all formulations)

·       April 2025: $3.05 (Statista)

·       May 2025: $3.15 (AAA, national average)

·       June 2025: $3.150 (EIA, all formulations)

·       July 2025: $3.285 (FRED data for U.S. City Average)

Key Observations:

·       Prices have been relatively stable, with the first few months hovering around the $3.00-$3.15 range, according to sources like LendingTree and the U.S. Energy Information Administration (EIA). 

·       There was a slight increase in price as the summer driving season began, with data from AAA Fuel Prices showing a national average of $3.19 in May and increasing into the summer months. 

·       The most recent data from July and August 2025 shows prices around $3.12-$3.28, with the U.S. City Average for regular conventional gas at $3.285 as of July 2025, according to data from the Federal Reserve Bank of St. Louis FRED. 

Factors influencing 2025 gasoline prices

·       Lower crude oil prices: Forecasts from the EIA and other sources indicate a decline in crude oil prices during 2025, which translates to lower gasoline prices compared to 2024.

·       Declining consumption: The EIA projects that U.S. gasoline consumption will decrease in 2026 due to improved vehicle efficiency and an increasing number of electric vehicles.

·       Regional variations: Gasoline prices vary significantly by region. For example, the West Coast saw much higher average prices in 2025 compared to the Lower Atlantic, a trend expected to continue.

·       Local refinery closures: In some regions, like the West Coast, refinery closures may tighten regional supply and potentially offset lower crude oil prices, contributing to higher local gas prices. 

https://www.google.com/search?q=us+regular+gasoline+prices+by+month+2025

Comments

The price of oil has eased from $65/bl to range between $64/bl and $62/bl. The average price of regular gasoline in the US was in the $3.08 to $3.15 range in the first 6 months of 2025. Liquid Natural Gas prices continue to decline. Most States had regular gasoline prices below $3.00.

Norb Leahy, Dunwoody GA Tea Party Leader