Workers connect drill bits and drill collars used to extract oil in the Permian basin outside of Midland, Texas.
Brittany Sowacke | Bloomberg | Getty Images
After three and a half years, a tripling in the S&P 500 Energy Index, and many soon-to-be-forgotten culture-war volleys, the U.S. Department of Energy announced Oct. 12 that U.S. crude oil production had hit an all-time high of 13.2 million barrels per day, entirely wiping out Covid-era losses of more than 3 million barrels per day.
The energy sector’s big stock move in 2021 and 2022 was mostly a recovery from a disastrous decade for Big Oil, when tens of billions of cash flow were lost on unprofitable fracking wells, and of a consolidation that was good for company profits, dividends and shareholder returns.
The foundation of the 2010s oil business was cracking when Covid broke it, said Rob Thummel, senior portfolio manager at Tortoise Ecofin in Kansas City, Mo. Monthly production topped out at 13 million barrels per day in November 2019 and hit 9.9 million by February 2021.
“Capital discipline in the U.S. industry hasn’t gone away, and oil is at $85 to $90 a barrel,” he said.
So, what brought Big Oil back, and what’s next?
Here are seven important factors that played into U.S. oil’s recent history and will influence its future.
Why the shale drilling bust ended
Oil broke gradually and then suddenly. The S&P 500 Energy Index lost 40% of its value between 2014 and 2019. But the pandemic drove the fast part of the bust, in part by leading Wall Street to insist on further cuts in capital spending, Thummel said.
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What brought it back was renewed demand and higher prices.
Recessions end, and oil demand has slowly rebounded after the 2020 downturn and lingering supply-chain shock. And rising prices for WTI crude – which careened during Covid to less than $15 a barrel, shot back to $120 in 2022, and is now near $90 – can make previously-unprofitable plays work, he said.
The U.S. production rebound is more concentrated
Big Oil isn’t back all over America: Production is still down sharply in Oklahoma and North Dakota. It hasn’t changed much in Alaska, where production is in a long-term tailspin. And offshore oil drilling in the Gulf of Mexico recovered to 2 million barrels a day, but hasn’t grown.
Instead, the surge is concentrated in the Permian Basin region of Texas and New Mexico, where production costs are among the lowest in the country, said Alexandre Ramos-Peon, head of shale well research at Rystad Energy. Oil from the Permian Basin costs an average of $42 a barrel to produce, he said, with North Dakota in the high $50s to $60.
North Dakota is also hampered by weaker access to pipelines than the Permian Basin, where many producers can use pipelines that lie entirely within Texas, skirting federal regulation of interstate pipelines. That’s only one example of a relaxed regulatory environment in Texas, compared to places like climate-conscious Colorado, the nation’s No. 4 oil producer, where output is still down 3 million barrels per month, said Jay Hatfield, CEO of Infrastructure Capital Advisors in New York.
“There’s this place called Texas that doesn’t really know what energy regulation is,” he said.
Where oil companies have been spending their money
U.S. oil companies cut capital spending to $106.6 billion last year from $199.7 billion in 2014, according to Statista, contributing to the decline in oil production and arguably delaying the recovery. Andthey put that money to work paying higher dividends and doing stock buybacks, Thummel said.
According to Energy Department data, oil and gas companies paid out about $75 billion per quarter in the last year. The share of oil-company operating cash flow going to shareholders rose to half of operating cash flow from about 20% in 2019, the department says.
The link between Exxon-Pioneer deal and peak barrels
Offsetting the decline in capital spending is higher productivity per well — while all of the U.S. oil production is back, the closely watched Baker-Hughes rig count is barely half of 2018 levels. The average production per rig of new wells just topped 1,000 barrels a day, up from 668 four years ago, according to the Energy Department. So the industry didn’t have to add a ton of new wells or drill in as many new places to recover fully.
On CNBC last week, ExxonMobil CEO Darren Woods said the company did the merger because it thinks its technology and scale can raise the productivity of Pioneer’s fields.
“Their [Pioneer’s] capabilities, bringing in their Tier 1 acreage, our technology, our development approach, frankly, brings higher recovery at lower cost,” Woods said.
That suggests more mergers to come as rivals like Chevron also make plays to boost their presence in U.S. shale, especially in the Permian Basin, Hatfield said. Chevron already has made several shale-related acquisitions in recent years, including $7.6 billion for PDC Energy this year and $5 billion for Noble Energy in 2020. Independent producers are under more pressure than more-stable super-majors to pay very high dividends to justify the risk of oil-price fluctuations, which will mean tighter constraints on their ability to keep up in technology and scaling of operations, he said.
U.S. crude, energy security and Big Oil economics
As a result of the rebound in crude, is American repatriating its oil? A little, says Hatfield. Permian shale right now is much cheaper to produce than offshore oil, comes with much less political risk than offshore drilling in much of the developing world, and takes much less time to make a profit than offshore wells. That’s leading companies like Exxon to bet more heavily on Permian shale than offshore drilling, he said.
“The super-majors are taking capital out of offshore,” Hatfield said. “They are reducing overseas development because it is more risky.”
The biggest part of the equation is that time equals risk, Ramos-Peon said. Global oil producers aren’t squeamish about investing in parts of the world where governments change, but the years-long investment cycles in offshore drilling make the much shorter turnarounds in Texas appealing to companies like ExxonMobil, which is one of the industry’s biggest offshore players.
“In the Permian, you get your capital back in a little over a year,” Hatfield said. “The return on investment is much faster and much higher because the wells begin to produce so quickly.”
What oil’s recent trading and Israel-Hamas mean for gas prices
Gas prices tend to move in tandem with the price of crude oil, which has dropped to about $88 per barrel from $94 in September, driving a 20-cent per gallon drop in the nationwide average price for regular. But the influence of OPEC, whose coordinated production cuts in June have driven prices up 35 cents, often offsets what domestic producers do, Ramos-Peon said. And right now there is the added uncertainty of whether the Israel-Hamas war will result in a slash in production from Iran, whose government supports the Hamas rebels who launched bloody attacks into Israel, he said.
“I believe crude prices will stay around the current level in the short term, and in the long term should trend down,” he said. “If there are sanctions against Iran, that will be bad for consumers.”
Short-term shale plays, oil consumption and climate change
What’s good for oil companies in the short-term doesn’t change the longer-term trajectory of the oil market or carbon reduction.
Meeting climate goals has more to do with long-term shifts in energy use than with short-term production targets, Ramos-Peon said. Rystad expects U.S. production to rise to 13.6 million barrels per day next year and 13.9 million in 2025, he said. After that, forecasts get more difficult because so much can change, but by late this decade oil consumption should peak before beginning to ebb, he said.
Even as more cars go electric, demand from older cars and uses of oil in chemicals will keep the oil business very large, Ramos-Peon said. And the risk that the business will erode will make drillers focus on shale more than offshore drilling, Hatfield said
“In the context of not knowing for sure, why wouldn’t you want a return on your investment in three years rather than 30?” he said.
Short-term, the biggest threat to the rosy scenario is that oil-industry cash flows are falling sharply from a peak last year. The Energy Department says its survey of 139 producers, foreign and domestic, shows a 36% drop in second-quarter operating cash flows from 2022. Profits are narrowing for the first time in two years, the department said.
Then again, the price of crude has risen $16 a barrel since the end of the second quarter. And in the oil business, price rules everything.
Enbridge is going big on solar again in Texas, and Meta is snapping up all the solar power it can get.
Last month, Electrek reported that the Canadian oil and gas pipeline giant just launched its first solar farm in Texas. Now it’s given the green light to Clear Fork, a 600 megawatt (MW) utility-scale solar farm already under construction near San Antonio. The project is expected to come online in summer 2027.
Once it’s up and running, every bit of Clear Fork’s electricity will go to Meta Platforms under a long-term contract. Meta will use the solar power to help run its energy-hungry data centers entirely on clean energy.
The solar farm project’s cost is around $900 million. Enbridge says it expects Clear Fork to boost the company’s cash flow and earnings starting in 2027.
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Enbridge EVP Matthew Akman said the project reflects “growing demand for renewable power across North America from blue-chip companies involved in technology and data center operations.”
Meta’s head of global energy, Urvi Parekh, added that the company is “thrilled to partner with Enbridge to bring new renewable energy to Texas and help support our operations with 100% clean energy.”
Meta’s first multi-gigawatt data center, Prometheus, is expected to come online in 2026.
Clear Fork is part of a growing trend: tech giants like Meta, Amazon, and Google are racing to lock down renewable energy contracts as they expand their fleets of AI-ready data centers, which use massive amounts of electricity.
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A fully electric Japanese electric pickup truck? It’s not a Toyota or Honda, but Isuzu’s new electric pickup packs a punch. The D-MAX EV can tow over 7,770 lbs (3,500 kg), plow through nearly 24″ (600 mm) of water, and it even has a dedicated Terrain Mode for extreme off-roading. However, it comes at a cost.
Meet Isuzu’s first electric pickup: The D-MAX EV
After announcing that it had begun building left-hand drive D-MAX EV models at the end of April, Isuzu said that it would start shipping them to Europe in the third quarter.
By the end of the year, Isuzu will begin production of right-hand drive models for the UK. Sales will follow in early 2026.
Isuzu announced prices this week, boasting the D-MAX EV features the same “no compromise durability” of the current diesel version.
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The D-MAX EV pickup features a full-time 4WD system, a towing capacity of up to 3.5 tons (7,700 lbs), and an added Terrain Mode, which Isuzu says is designed for “extreme off-road capability.” With 210 mm (8.3″) of ground clearance, Isuzu’s electric pickup can wade through up to 600 mm (24″) of water.
Powered by a 66.9 kWh battery, Isuzu’s electric pickup offers a WLTP range of 163 miles. With charging speeds of up to 50 kW, the D-MAX EV can recharge from 20% to 80% in about an hour.
The electric version is nearly identical to the current diesel-powered D-Max, both inside and out, but prices will be significantly higher.
Isuzu D-Max EV specs and prices
Drive System
Full-time 4×4
Battery Type
Lithium-ion
Battery Capacity
66.9 kWh
WLTP driving range
163 miles
Max Output
130 kW (174 hp)
Max Torque
325 Nm
Max Speed
Over 130 km/h (+80 mph)
Max Payload
1,000 kg (+2,200 lbs)
Max Towing Capacity
3.5t (+7,700 lbs)
Ground Clearance
210 mm
Wading Depth
600 mm
Starting Price (*Ex. VAT)
£59,995 ($81,000)
Isuzu D-Max EV electric pickup prices and specs
Isuzu’s electric pickup will be priced from £59,995 ($81,000), not including VAT. The double cab variant starts at £60,995 ($82,500). In comparison, the diesel model starts at £36,755 ($50,000).
The EV pickup will launch in extended and double cab variants with two premium trims: the eDL40 and V-Cross. Pre-sales will begin later this year with the first UK arrivals scheduled for February 2026. Customer deliveries are set to follow in March.
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In this photo illustration, Claude AI logo is seen on a smartphone and Anthropic logo on a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
Sopa Images | Lightrocket | Getty Images
OpenAI and Anthropic continue to lead a fundraising bonanza in artificial intelligence, raising historic rounds and stratospheric valuations.
But when it comes to finding AI exits for venture firms, the market looks a lot different.
AI startups raised $104.3 billion in the U.S. in the first half of this year, nearly matching the $104.4 billion total for 2024, according to PitchBook. Almost two-thirds of all U.S. venture funding went to AI, up from 49% last year, PitchBook said.
The biggest deals follow a familiar theme. OpenAI raised a record $40 billion in March in a round led by SoftBank. Meta poured $14.3 billion into Scale AI in June as part of a way to hire away CEO Alexandr Wang and a few other top staffers. OpenAI rival Anthropic raised $3.5 billion, while Safe Superintelligence, a nascent startup started by OpenAI co-founder Ilya Sutskever, raised $2 billion.
While Meta’s massive investment into Scale AI amounted to a lucrative exit of sorts for early investors, the overarching trend has been a lot more money going in than coming out.
In the first half, there were 281 VC-backed exits totaling $36 billion, according to PitchBook. That includes the roughly $700 million acquisition of EvolutionIQ, an AI platform for disability and injury claims management, by CCC Intelligent Solutions, and the public listing of Slide Insurance, which builds AI-powered insurance offerings for homeowners. Slide is valued at about $2.3 billion.
Read more CNBC reporting on AI
“The dominant exit trend right now is frequent but lower-value acquisitions and fewer IPOs with significantly higher value,” said Dimitri Zabelin, PitchBook’s senior research analyst for AI and cybersecurity.
CoreWeave’s IPO, which took place at the very end of the first quarter, was the exception on the infrastructure side. The stock shot up 340% in the second quarter, and the company is now valued at over $63 billion.
Zabelin said the pattern of more investments in applications with smaller deals has been in place for the past year.
“Vertical solutions tend to plug more easily into existing enterprise gaps,” Zabelin said.
The acquisitions wave is being driven, in part, by what Zabelin calls bolt-on deals where larger companies buy smaller startups to enhance their own future valuations, hoping to enhance their value ahead of a future sale or IPO.
“That also has to do with the current liquidity conditions in the macro environment,” Zabelin said.
Outside of AI, activity is slow. U.S. fintech funding dropped 42% in the first half of the year to $10.5 billion, according to Tracxn. Cloud software and crypto have also seen sharp pullbacks.
Zabelin said IPO activity could pick up if economic conditions improve and if interest rates come down. Investors clearly want opportunities to back promising AI companies, he said.
“The appetite for AI, specifically vertical applications, will continue to remain robust,” Zabelin said.
— CNBC’s Kevin Schmidt contributed to this report.