Billions into the void: US shale won't save the world from oil shortages
The closure of the Strait of Hormuz in the spring of 2026 divided the American economy into two camps. For ordinary consumers and the Donald Trump administration, which is preparing for the November midterm congressional elections, oil near $100 per barrel has become a serious political threat. Expensive gasoline hits the ratings, forcing the White House to demand a reduction in quotations to $50. A different mood prevails in the headquarters of Texas oil corporations - the war between the United States and Israel against Iran allows the American shale sector to generate historic super profits. However, although the United States is better protected from a new oil shock than in the 1970s, the miracle of replacing oil from the Persian Gulf with American oil will not happen this time. Details can be found in the Izvestia article.
Profits are off the charts
According to calculations by Jefferies investment bank, in March alone, American manufacturers will receive an additional $5 billion in free cash flow due to a jump in quotations by about 47% since the beginning of the conflict in the Middle East. Rystad Energy analysts predict that if the average annual price is fixed at $100 per barrel, the US oil sector will receive a huge financial boost of $63.4 billion.
The American WTI benchmark is confidently trading around the $100 mark, providing companies with profitability unattainable in the depressive year of 2025, when the average price barely reached $69. As Trump bluntly noted, "The United States is the largest oil producer in the world by a huge margin, so when prices rise, we make a lot of money."
The current crisis is fundamentally different from the oil shocks of the 1970s (for example, the OPEC embargo of 1973 or the Islamic Revolution of 1979). Half a century ago, the Arab embargo siphoned dollars from the American economy, provoking severe stagflation and trade deficits. Today, the United States is facing turmoil in the global market as a net exporter and the largest producer of liquid hydrocarbons on the planet.
Expensive oil is still hitting the wallets of drivers in California or New York, and inflationary pressures are making the Federal Reserve nervous. At the same time, at the macroeconomic level, there is an internal redistribution of capital: money from the pockets of consumers flows into the balance sheets of corporations in Texas, New Mexico and North Dakota, as well as in the form of taxes deposited in local budgets. As a result, the overall impact on the GDP of the United States is much milder than for energy-deficient economies in Europe or Asian countries that are completely dependent on imports.
The balance beam is broken
Against the background of blocking up to 18 million barrels of Middle Eastern oil per day in the Strait of Hormuz, the global market is waiting by inertia for American shale to play the usual role of a balancer. In previous decades, Texas independent drillers instantly reacted to price peaks by aggressively increasing production. Today, this mechanism will not work, because it is physically and financially impossible to compensate for the volumes lost due to the war at the expense of American raw materials.
The main reason lies in the radical change in the business model. The shale sector has gone through a massive wave of consolidation. High-quality land came under the control of giants like ExxonMobil (which absorbed Pioneer for $59.5 billion) and ConocoPhillips. For public corporations, the growth of production for the sake of market share has lost its meaning, strict capital discipline has become a priority. All unexpected proceeds from expensive oil will go to shareholders through dividends and share buyback programs. The leadership of the majors explicitly states that the annual investment budgets are fixed and no one plans to change them due to geopolitical force majeure. In the past, private companies could quickly recoup price spikes, but over the past three years their ranks have thinned due to mergers and acquisitions.
The futures market sends a clear signal to operators to refrain from large-scale drilling. Spot prices soared by 65%, but contracts for 2027 increased by only 17%, and for 2028 — by 12%. Investors are putting an early end to the conflict in the quotes. It is economically pointless to drill new wells worth $11 million each for a temporary price spike. According to estimates by the consulting company Enverus, for a real change in the drilling plans of the industry, a stable long-term corridor of $90-100 is required, supported by the growth of the far end of the futures curve.
The policy of the White House has an additional cooling effect. Trump's statements about the desire to see oil at $50 hang over the industry like a sword of Damocles. Oil companies fear that as soon as the Middle East crisis subsides, the administration will take aggressive steps to bring down prices for the sake of electoral points. This forces even independent producers to hedge current production at $75 and abandon the expansion of the drilling fleet.
Exhaustion of the database
In addition to financial constraints, geology is also involved. American shale is "maturing" by leaps and bounds. Outside of the most productive areas of the Permian basin, production growth rates are steadily falling. Reserves of first-class lands (tier-1 acreage) are close to depletion.
Baker Hughes statistics show that the number of active drilling rigs in the United States has decreased by 39 units compared to last year, and the number of hydraulic fracturing teams is also decreasing. The U.S. Energy Information Administration predicts a decline in domestic production due to a slowdown in drilling activity. Even if the operators had decided to urgently increase production, it would have taken months to prepare the sites, drill and connect to the infrastructure.
The global economy finds itself in a situation where North America is happy to absorb tens of billions of dollars in windfall profits from the Middle East disaster, but Texas oil rigs will continue to operate at the same pace without too sudden movements. So there will be no "shale miracle" that can quickly ignite a fire in the oil market, certainly not in the foreseeable future. Global consumers will have to cope with the physical shortage of barrels on their own, while American oil companies are distributing record dividends.
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