U.S. Oil Production

Because the United States is the world's largest importer, it is easy to forget these facts.

U.S. is the oldest major global oil producer.

U.S. is formerly the Number 1 global oil producer.

U.S. is currently the Number 2 global oil producer.

U.S. has produced more oil, cumulatively, than any other country (180 billion barrels from 1918 to 1999).

U.S. has produced more oil, cumulatively, than the current reserves of any country but Saudi Arabia.

Production in the United States has several unusual aspects. One is the private ownership of resource rights. In most major producing countries, the government owns the rights to develop resources. For privately owned property in the United States, the decision to explore for and produce oil is between the landowner and the producing company. The producing company compensates the landowner by the payment of a royalty on each barrel of oil produced. Early in the industry's development, there were few government restrictions. Now, there are overriding rules about well spacing and environmental standards.

The private ownership of resource rights contributes to two other aspects unique to production in the United States -- the active participation of thousands of independent producers and the prevalence of the “stripper” well, one producing less than 10 barrels a day.  As the industry was developing, many entrepreneurs with limited capital resources, but a high tolerance for risk, joined its ranks and, in fact, discovered some of the largest fields in the United States.  Most of the time, their finds were less dramatic, but large enough for a small company to be a success.  The company's success was, of course, the landowner's success as well.  Many of the wells never flowed with very high volume and, as they aged, volume dropped.  Nonetheless, stripper wells are likely to remain in production as long as the price of oil covers the production cost.  They currently account for about 75 percent of all wells in production in the United States and produce somewhat less than 900,000 barrels per day, 15 percent of the total U.S. crude oil production.

Just as oil resources are not evenly distributed around the globe, neither are they evenly distributed throughout the United States.  Given the way production data are reported, the biggest production region by far is the U.S. Gulf Coast, and the largest producing state is Texas. The Gulf Coast region is home to two of the most important producing provinces, the Permian Basin, located inland in West Central Texas and Eastern New Mexico, and the Federal Offshore portion of the Gulf of Mexico. 

Texas has been the largest producing state since the late 1920s, when it surpassed California.  For a time in the late 1980s, Alaska rivaled Texas, as the more mature Texas fields declined and production from the giant Alaskan North Slope fields, begun in 1977, was still approaching its peak level of about 2 million barrels per day.  Since that time, however, production from the Alaskan North Slope has fallen rapidly.

Production from the Federal Offshore, now about equal to output from the Alaskan North Slope, is limited by policy to California and the western and central Gulf of Mexico.  New production areas, or “plays,” led to a resurgence in activity in the Gulf of Mexico, the only area with active new leasing. Leasing, drilling, production and the numbers of fields under development all set records in 1997, as the deepwater Gulf of Mexico became the place to be for almost any larger oil company, domestic or foreign. These new prospective oil producing areas are further offshore, in the much more challenging deepwater

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