Why $100 oil isn’t triggering a US drilling boom
Even as the war in Iran drives oil prices to $100 per barrel, U.S. oil companies are unlikely to increase their domestic production.
High oil prices have hit consumers’ wallets with a 90-cent increase per gallon of gasoline in the past month. But the high price is also a boon to oil companies. A barrel of oil that would have sold for around $63 in the first half of February is now worth at least 50% more. Despite a more profitable product, industry analysts told Straight Arrow News they expect total U.S. oil output to stay steady or dip slightly this year.
“There is an opportunity for companies to enhance their cash flow,” said Skip York, a nonresident fellow at Rice University’s Baker Institute for Public Policy. “What that doesn’t translate to is an immediate increase in production.”
What’s the current state of US oil production?
In 2025, domestic oil production hit an all-time high of 13.6 million barrels per day, according to the U.S. Energy Information Administration.
About 60% of oil consumed in the U.S. is also produced within the country; the remainder is mostly imported from Canada and Mexico. Prices are set on the global market, where the U.S. is a net exporter of oil. But American companies need a higher price to break even on new wells at U.S. oilfields such as the Permian Basin, compared with other production hubs around the world, such as Iraq, Saudi Arabia or Kuwait.
“We have to rely on OPEC keeping the price up above our break-even cost in order to turn a profit,” said Ed Hirs, an energy fellow and lecturer at the University of Houston.
That minimum break-even price is at least above $60 per barrel, according to a 2025 survey from the Federal Reserve Bank of Dallas of 83 oil and gas firms.
Prior to the start of U.S. and Israeli strikes against Iran in February, the U.S. oil market was considered oversupplied, because global oil demand remained flat as OPEC countries started producing more. In January, West Texas Intermediate (WTI), the price benchmark for U.S.-produced oil, hit a low at $55, and as of mid-March, Baker Hughes reported 39 fewer active oil rigs than a year earlier.
How will the oil industry respond to high prices?
The main reason U.S. production is unlikely to change even as the disruption in the Strait of Hormuz causes an oil price surge: Uncertainty.
“We don’t have any idea what the duration of this is going to be,” said Andrew Dittmar, principal analyst with Enverus Intelligence Research, an energy data analytics company. “There’s not a lot of incentive to bring more barrels forward versus maintaining the status quo.”
When the disruption ends, the price will drop again — likely closer to U.S. producers’ break-even point, reducing their profit margin.
The key question the oil industry is asking itself, York said, is, “how long do I think prices are going to stay high enough that it justifies drilling that rig?”
The industry went through tumultuous years including a price war in the 2010s, in which OPEC countries boosted production, bringing prices below American break-even rates, and the COVID-19 pandemic when oil demand slumped. Now, York said, oil companies’ boards are more focused on maintaining value for shareholders than risking capital on drilling new oil wells.
“Its not an environment that you can forecast very easily,” Dittmar told SAN.
The Trump administration has sought to assure the public that the conflict will last weeks, not months. Even if U.S. companies want to, ramping up production would take months.
“Right now the producers in the oil and gas patch are in a position where they are profitable and will continue to be profitable for the duration of this conflict,” Hirs told SAN. “As a whole, none of them want to be out there drilling just to lower the price.”
Ella Rae Greene, Editor In Chief
