10 MMBOPD+ has only been achieved twice before
U.S. crude oil production exceeded 10 MMBOPD in November 2017, a milestone that has not been surpassed for 47 years.
According to the EIA, the U.S. produced 10.038 MMBOPD in November, the most recent monthly data available. This is the second-highest U.S. monthly oil output ever, surpassed only by November 1970, when the country produced 10.044 MMBOPD. Based on the past year of rapid production growth, it is almost certain that the U.S. will break this record in December.
The country was a very different place when the U.S. set this production record, in late 1970. Richard Nixon was president and the Vietnam War was still raging. The counterculture movement was going strong; Woodstock had drawn massive crowds just one year before. The airwaves were filled with bands like Simon & Garfunkel, whose “Bridge Over Troubled Water” topped the charts for the year. Groups like The Guess Who and The Jackson 5 were making waves, and the Beatles had just broken up.
The year saw the fourth Super Bowl, when the heavily-favored Vikings were beaten by the Chiefs 23-7. American cars were still in their “greatest generation,” with Mustangs, Camaros and Challengers establishing the muscle car as an American icon.
Conventional production and $3.40/bbl oil dominated in 1970
The oil and gas industry was a very different place as well, at the peak of decades-long growth. Oil prices were around $3.40/bbl, far below modern prices. Even after adjusting for inflation, oil cost roughly $21.50/bbl, about one third of current prices. Gasoline was similarly cheap, with leaded gasoline going for a nominal $0.357/gal, $1.467/gal after adjusting for inflation.
Production came from conventional fields, primarily in the lower 48 states. The massive Prudhoe Bay field had been discovered two years prior, but would not begin production until the late 1970s. The shock of the 1973 oil embargo was still to come.
Tight oil production entirely responsible for recent growth
Today, the oil industry is a different beast. Unconventional production from tight oil formations has skyrocketed, growing U.S. production from 5.6 MMBOPD in 2010 to the current production of 10.038 MMBOPD in seven years. For reference, it took the U.S. about 20 years to grow from 5.6 MMBOPD in 1950 to the peak in 1970.
Formations like the Permian and Bakken have grown massively over the past seven years, and with oil currently trading around $65/bbl, companies are planning to continue growth. Even supermajors like ExxonMobil (ticker: XOM) have embraced unconventionals, as the company plans to spend billions in the Permian in the coming years.
Based on 2017, a year that delivered rapid production growth, and looking forward to heavy investment plans and strong 2018 production guidance from U.S. shale producers, it would be a complete surprise if the U.S. doesn’t shatter the record multiple times in the year to come.
