Drilling for oil in America is cheaper than ever before and the cost is still dropping, according to a report published Wednesday by the Energy Information Administration (EIA).
Source: Energy Information Administration
“Costs per well generally increased from 2006 to 2012, demonstrating the effect of rapid growth in drilling activity,” the EIA report stated. “Since 2012, costs per well have decreased because of reduced overall drilling activity and improved drilling efficiency and tools.”
Essentially, American oil wells today are producing more oil with less money.
Oil cost $105 per barrel back in June of 2014, which created enormous incentives for U.S. drilling. America surpassed Russia’s production last year as the world’s largest and fastest-growing producer of oil and natural gas. Oil production in 2015 was 80 percent higher than it was in 2008 due to ever-increasing efficiency, allowing America to produce an average of 9.3 million barrels of crude oil per day last June.
Oil prices have since fallen to under $40 per barrel, forcing the U.S. energy industry to double down on innovative new drilling techniques, such as horizontal drilling and hydraulic fracturing, or fracking, which has held the price of oil down.
Cheap oil has forced fracking to become less costly and more efficient, even causing American oil production levels to remain relatively constant despite low oil prices and declining investment. Even though the total number of American oil rigs dropped from a high of 1,309 in October 2014 to only 475 in December 2015, the industry’s increasing efficiency largely made up for the decline. The fewer number of rigs only caused an eight percent drop in production, according to a February EIA report.
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