Capitalism, or why American oil production is surging

Capitalism works. Profits drive economic growth, and higher prices incentivize increased production of otherwise scarce goods.A year ago, the United States Energy Information Administration forecasted that U.S. crude oil production for 2026 would average 13.3 million to 13.5 million barrels per day. Later in 2025, driven by stronger-than-expected output, the EIA raised its 2026 forecast to 13.8 million barrels a day. Recent EIA data show U.S. producers responding to higher oil prices caused by the war in Iran with sharply higher output. The EIA now forecasts 2027 production at 14.3 million barrels a day, setting yet another all-time record. Weekly numbers already confirm a rapid expansion, with the active rig count rising after years of decline and daily production averaging 13.9 million barrels over the four-week period ending Sept. 11.These figures prove that predictions of declining U.S. output due to depleting well reserves are unfounded. The Permian Basin of West Texas and Eastern New Mexico is the primary engine of this growth. The EIA expects Permian production to average nearly 7 million barrels a day this year, with 2027 futures at $80 pointing to even higher output next year. This is well above the Federal Reserve Bank of Dallas survey, which puts average breakeven prices across the Permian below $70 per barrel. Offshore production is also surging. Gulf output is running 200,000 barrels a day (10%) above 2025 levels, bolstered by several major new projects, Shenandoah, Ballymore, Whale, and Salamanca, which will add another 190,000 barrels a day to daily production. Bolstered by strong profits, domestic producers are aggressively investing in technology to boost recovery rates. While a typical new well initially yields only 10% to 15% of its oil, enhanced recovery methods such as water flooding, gas injection, chemical flooding, and thermal techniques can push ultimate recovery up to 60%. Higher oil prices provide the financial incentive needed to deploy these advanced technologies.CNN, POLITICO, AND MS NOW PLAN TO SUE TRUMP OVER WHITE HOUSE BANThe growth trajectory extends at a minimum for another two years and probably longer. The futures market points to structural pricing above $70 through mid-2028. At these price levels, geologists estimate the Permian holds up to 55,000 possible new drilling locations. This combination of thousands of prospective wells and enhanced recovery techniques promises continued expansion. For instance, by utilizing lateral drilling distances of up to 4 miles and advanced recovery methods, Exxon Mobil aims to double its Permian production to 2.5 million barrels a day by 2030.Price and export controls do not work, but new supply does.James Rogan is a former U.S. diplomat who later worked in law and finance for over 30 years. He writes a subscription-based daily note on markets, economics, politics, and social issues. His email is [email protected].