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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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What Recession? The U.S. Oil Industry Won’t Stop Growing

  • The North American oil industry is growing faster than expected
  • Companies' biggest worry is no longer the possibility of the economy sliding into a recession but the supply of enough equipment.
  • "We're kind of in unprecedented territory here," Rob Mathey, a senior analyst at Rystad Energy, said.
Oil Industry

In Europe, fears of a potentially deep recession continue to take hold. Meanwhile, these fears seem to have subsided in North America—at least in the oil industry. Instead, it's back to growth mode for the shale patch and the oil sands.

This is according to Schlumberger, whose chief executive said this week that activity in the North American oil industry was growing faster than expected, with companies' biggest worry no longer the possibility of the economy sliding into a recession but the supply of enough equipment.

The equipment security seems to have lingered after the worst of the pandemic-driven supply chain chaos subsided. Bloomberg reported that many companies struggled to secure the fracking equipment they need earlier this month because of the short supply.

The report noted that oilfield service providers, including Halliburton, were "reconditioning" existing equipment rather than building new because of their wariness of another downturn that would make such an investment pointless. Among the things that are in short supply are frack pumps and frack crews: the labor shortage has also lingered after the pandemic.

"We're kind of in unprecedented territory here," Rob Mathey, a senior analyst at Rystad Energy, told Bloomberg. This supply situation, he said, "is going to really lead to issues with E&Ps trying to grow." 

Schlumberger's Olivier La Peuch, however, sounded on a much more optimistic note this week. "There is huge momentum," he said at an industry event as quoted by Reuters, adding that investment rates in the industry were "something I've not seen for quite some time."

Related: OPEC+ Cuts Production Despite Resistance From Russia

There are also more signs of returning optimism in the U.S. oil industry. The recent merger between Colgate Energy and Centennial Resource Development is one of them. The owners of Colgate Energy believe that U.S. oil production is going to grow, and it's going to grow because of the low-cost shale acreage in the Delaware Basin, part of the Permian play.

"Growth gets harder over time as the best inventory in North America gets depleted," James Walter told Bloomberg. "The Delaware has more room to run and more top-tier undeveloped inventory than any other basin."

Yet despite the upbeat sentiment demonstrated by Schlumberger and Colgate Energy, the Energy Information Administration just revised down its production outlook for 2023 by some 70,000 barrels daily to 12.63 million bpd. While not a huge revision, the figure suggests there are still obstacles to all-out growth.

In Canada, meanwhile, output is growing, hitting a new record in the first half of the year in Alberta at 3.6 million barrels daily. Despite the tightening emission-reduction noose, the Canadian oil industry is expanding its production and reaping the benefits of higher prices. The government is sharing in the benefits, as record profits lead to higher taxes being paid into state coffers.

"Imagine a bank machine that's broken, and it's spitting out $100 bills and there's not enough people to pick them up and there's $100 bills gathering on the ground. This is how profitable these businesses are right now," a portfolio manager from Canoe Financial described it to CBC.

Canadian oil producers don't seem to face the same equipment and labor shortage problems their U.S. counterparts are seeing. Still, they are faced with the federal government's determination to reduce the industry's carbon footprint. This could curb their growth enthusiasm as they declare their support for net zero and pledge to invest in it.


It looks like optimism is returning to U.S. and Canadian oil but with a sense of wariness after the latest downturn pummelled the industry into the ground. Net-zero government plans are adding to that wariness, but with demand for fossil fuels still going strong, it only makes sense that the industry capitalizes on that while it lasts.

By Charles Kennedy for Oilprice.com

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