The oil and natural gas industry is in an interesting position. The U.S. presidential election is only a few weeks away, and its outcome can be anticipated to have a considerable impact on the energy sector for the next four years. Meanwhile, various initiatives in support of renewable energy are underway, and key technologies have advanced.
Here’s an overview of the state of the American oil and natural gas industry today.
The Importance of Fracking
It’s important to understand when we are talking about the American oil and natural gas industry today, we are talking about hydraulic fracturing, more popularly known as “fracking.”
As you can see from the U.S. Energy Information Administration’s (EIA) charts, nearly every well that has been drilled in the United States for the last 10 years and produces a substantial amount of oil is horizontal or directional in character. Horizontal and directional wells may start with some vertical drilling. Still, their paths then head in different directions. The difference between the two involves the kind of infrastructure that is necessary to extract the oil from the reservoir.
The EIA has found that only 19 percent of completed wells are vertical, as opposed to 81 percent that are horizontal or directional; in addition, 100% of horizontal wells are fracked. You can’t get oil out of them otherwise. Directional drilling also often involves fracking.
That’s why the stakes of the upcoming U.S. presidential election are high for the American oil and gas industry.
Why the Stakes are High for Fracking
Many professionals in the oil and natural gas industry worry about the implications of a Harris presidency. While her platform no longer calls for banning fracking, she has adopted this position in the past. Industry experts also note that she targeted major oil companies for investigation during her tenure as a prosecutor in California.
Given the statistics above, a ban on fracking would be catastrophic for the domestic production of oil and natural gas. Approximately 12 million barrels would be pulled from the global market. Meanwhile, not only would the price of gas skyrocket at the pump, but transportation costs for goods of all kinds would also increase, triggering higher prices on nearly everything for consumers. The U.S. probably would slide into a recession.
On the other hand, a second term for former President Donald Trump could be expected to be advantageous for the oil and natural gas sector. The Trump administration saw a relaxation in rules and regulations, allowing domestic oil and natural gas companies to expand their operations. As a result, the U.S. became the world’s top oil and natural gas producer in 2018.
Meanwhile, the U.S. still has a long way to go when it comes to renewable energy.
The Inefficiency of Renewable Energy
According to a 2017 Management Information Services study, the U.S. government invested $158 billion in federal subsidies for solar and wind between 1950 and 2016. The Biden-Harris Administration has also recently allocated $7.3 billion in renewable energy initiatives.
Yet wind and solar energy sources produced only about 14% of the country’s electricity in 2023. Add all of the energy produced by renewable sources together, and they accounted for only 21.4%. Meanwhile, energy from hydrocarbons accounted for 60%.
At the same time, demand for energy is increasing at a historically steep rate, in part because of the increasing incorporation of artificial intelligence (AI). According to the International Energy Agency (IEA), “Global electricity demand is forecast to grow by around four percent in 2024, up from 2.5% in 2023… This would represent the highest annual growth rate since 2007, excluding the exceptional rebounds seen in the wake of the global financial crisis and the COVID-19 pandemic. The strong increase in global electricity consumption is set to continue into 2025, with growth around four percent again.”
These numbers illustrate how inefficient renewable energy is from an economic perspective and how much the U.S. continues to depend on oil and natural gas. While some politicians, municipalities and states aim to transition to 100 percent renewable energy in as little as 10 years, there’s reason to believe the process will take much longer.
The upshot of this situation is that the U.S. will continue to rely on oil and natural gas for the foreseeable future. The good news is that technological advances are helping to make oil and natural gas extraction more efficient than ever.
Advances in Oil and Natural Gas Technology
Today’s oil and natural gas drilling operations are producing more domestic oil than at any other point in our nation’s history. In part, this is due to major technological advances.
Seismic imaging has improved, allowing operators to map subterranean regions more accurately. Not only can they understand where the oil is, but also what conditions surround it. This enables superior decision-making for extraction.
In addition, today’s AI-based systems enable operators to model and predict how the reservoir will react, given different potential drilling locations. As a result, when a well goes in, it has been designed in the most advantageous way possible.
Moreover, horizontal and directional drilling allows operators to extract the resources with a minimal number of wells. This leaves the surface as unaltered as possible and helps preserve the natural environment.
That’s not all. Today’s oil and natural gas companies can monitor and measure the relevant formations during drilling itself. This enables them to adjust their drilling in real time to achieve optimal results.
Today’s AI-based systems can also ensure that predictive maintenance is completed, which prevents equipment failures. This decreases the chances of accidents and improves safety. Drones and other robots also conduct inspections of equipment, keeping human staff out of harm’s way.
The Bigger Picture
Due to advances in technology, American companies are producing more oil and natural gas than ever before. At the same time, they are improving safety and keeping the number of wells to a minimum.
While the U.S. presidential election casts the exact future of the oil and natural gas industry in doubt, the bigger picture appears certain: demand for energy is not going down, and renewable energy alone cannot meet that demand. As a result, the oil and natural gas industry will continue to play a vital role in meeting our nation’s energy needs.
As seen in Reuters, IBTimes, and Yahoo Finance, Matt Willer, the Managing Director of Capital Markets and Partner at Phoenix Capital Group Holdings, LLC, has 24 years of corporate finance experience at the executive management and board of director level for public and private companies in the United States and Canada. He has deep expertise in scaling and financing growth-stage companies in multiple industry verticals. He has raised over $1.1B in Capital through debt and equity transactions, both brokered and non-brokered, with issuers. Willer is responsible for investor relations and structuring, managing, and acquiring private capital across multiple capital sources and classes at Phoenix Capital Group Holdings, LLC. The company’s capital is deployed into several categories of mineral assets, including royalties, working interests, and select projects in the key basins domestically.
Oil and gas operations are commonly found in remote locations far from company headquarters. Now, it's possible to monitor pump operations, collate and analyze seismic data, and track employees around the world from almost anywhere. Whether employees are in the office or in the field, the internet and related applications enable a greater multidirectional flow of information – and control – than ever before.