We construct new measures of drilling productivity and find that productivity increased sixfold from the mid-2000s to early 2017. Gains in below-ground efficiency—the number of barrels produced per foot of drilled wells—have largely driven this increase in overall productivity. The large oil price declines during the Great Recession and from 2014 to 2016 also played a role. However, further large increases in productivity are unlikely absent additional improvements in technology or a subsequent large downturn in oil prices.
U.S. production of crude oil has steadily trended higher in recent years despite declines in crude oil prices. Chart 1 shows that the price of benchmark West Texas Intermediate (WTI) crude oil fell starting in mid-2014 and was followed promptly by a large reduction in the number of active drilling rigs. However, U.S. oil and gas production has continued to increase almost uninterrupted. In fact, in 2018, the United States became the world’s largest producer of crude oil (Energy Information Administration 2018). The steady rise in production at a time when oil prices and rigs declined suggests that productivity within the oil and gas sector has increased.