HomeMediaLatest NewsThe American record: why the United States was able to lower world oil prices

The American record: why the United States was able to lower world oil prices

19 December 2023

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance, commented to the Izvestia newspaper on the shale oil production growth in the United States.

— Indeed, oil production in the United States increased quite significantly in 2023, —Marcel Salikhov said in an interview with Izvestia. — Over the past 12 months, production has increased by about a million barrels per day, or 8.5%. That's quite a lot. At the same time, the number of working drilling rigs has decreased by 20% during this time. This led to the fact that expectations about production in the United States this year were quite conservative, but they did not materialize.

According to Marcel Salikhov, several main reasons can be identified at once.

- Firstly, it is the increase in the efficiency of drilling horizontal wells, which was facilitated by the consolidation of the industry and the major players arrival. This has increased economies of scale and reduced the cost of financing investments even in the current high interest rate environment.

- Secondly, the expert continues, the OPEC+'s policy of reducing production contributes to the fact that the US shale companies can increase production without fear of its severe decline. This has already happened in 2018-2019. A similar scenario is partly repeated.

- Thirdly, the situation in the US economy was quite favorable, despite the tightening of monetary policy. For example, in the third quarter, US GDP grew by 4.9% year-on-year. A strong economy leads to an increase in the consumption of petroleum products and supports domestic production," Salikhov said.

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