Crude Reality: Oil Production Can't Keep Up With Prices

Crude oil prices remain at near-record highs, as the Russian war in Ukraine drags on and the U.S. bans the import of Russian oil. At the same time, oil demand is increasing as auto and air travel approach their pre-pandemic levels. All of this should point to a ramp up in domestic oil production...but that is not happening as fast as some would like. A recent FOX Business analysis found the number of active oil rigs in the U.S. is now at 531, less than a third of the number ten years ago.

There are many reasons for the lag in oil production versus prices. "Reason number one why the rig count is not as high now as in the past is it doesn't need to be, because these rigs are much more efficient," says Karr Ingham, Texas petroleum economist. "We can drill more wells with one rig that we ever could in the past."

"The rig count is now is not as high as in the past, and it probably never will be," he continues. "That's not to say we can't produce record and growing amounts of crude oil, because we did before the pandemic."

While oil companies don't need as many rigs now as in the past, they're still struggling to ramp up production coming out of the pandemic, which briefly crashed the oil market two years ago. "(Production) most certainly would be growing faster, I think, if we didn't have artificial constraints in place," says Ingham. "For instance, this hostility from the (Biden) administration and the federal government to oil and gas development in the United States."

Indeed, the Biden administration has frustrated the industry by restricting domestic production with its green agenda, while blaming Russian President Vladimir Putin and "greedy" oil companies for high prices. Now, the president has authorized the release of one million barrels per day from the strategic petroleum reserves. Ingham tells KTRH that move is okay only as a temporary stopgap. "But it will be a terrible move if we don't do anything to allow and incentivize the much more rapid development of new crude oil production in the United States," he says.