- In 2024, U.S. crude oil production hit a record 13.4 million barrels per day, driven by advancements in fracking and horizontal drilling, positioning the U.S. as the world’s largest oil producer, ahead of Saudi Arabia and Russia.
- Despite the push for renewable energy through the Inflation Reduction Act and climate-focused policies, the U.S. oil industry continues to benefit from tax incentives like the intangible drilling costs (IDC) credit, complicating the balance between fossil fuel reliance and climate goals.
U.S. Breaks Global Oil Production Record Amid Energy Transition Efforts
In 2023, the United States produced more crude oil than any other nation has at any point in history, setting a new global production record. According to the U.S. Energy Information Administration (EIA), American oil production hit an unprecedented 13.4 million barrels per day (b/d) in August 2024, marking a significant achievement for the U.S. oil industry, which has seen tremendous growth over the past 15 years.
The record production is primarily due to advancements in horizontal drilling and hydraulic fracturing, commonly known as fracking. These techniques have transformed the oil industry, allowing producers to access previously unreachable oil reserves. In 2008, U.S. oil production had reached a low of 5 million b/d, but the adoption of these innovative technologies has since more than doubled output.
A Surging Oil Industry and Technological Innovation
Fracking and horizontal drilling have been at the heart of this production surge, helping to unlock vast reserves of shale oil. These methods enable oil companies to drill deeper and with greater precision, tapping into oil fields that were once considered uneconomical. This technological revolution has made the U.S. a dominant player in global oil production, even as other energy sources continue to rise.
The U.S., Saudi Arabia, and Russia accounted for nearly 40% of global oil production in 2023, with combined output reaching 32.8 million b/d. Russia’s oil production has declined due to sanctions and voluntary cuts in response to the Ukraine conflict. Saudi Arabia, the world’s second-largest oil producer, recently scrapped plans to boost its production capacity to 13 million b/d by 2027, further solidifying the U.S.’s position at the top. As of 2023, the U.S. was producing 13.0 million b/d of crude oil per day.
Energy Transition and Policy Shifts
The historic oil production comes at a time when the Biden administration is pushing for a transition to cleaner energy. The Inflation Reduction Act of 2022 allocated $369 billion in funding to combat climate change, with much of the funding delivered through tax incentives for renewable energy projects. This push is intended to accelerate the adoption of wind, solar, and other renewable sources, helping the U.S. achieve its ambitious climate goals.
However, while renewable energy projects are benefiting from tax incentives, the fossil fuel industry is still reaping substantial financial benefits from provisions in the tax code. One notable example is the intangible drilling costs (IDC) tax credit. The IDC credit allows oil and gas companies to write off many of the expenses associated with preparing a well for production, such as hiring workers, renting equipment, and clearing land. According to the White House’s Budget for Fiscal Year 2025, the IDC tax credit is expected to benefit oil companies by $1.7 billion in 2025 and $9.7 billion through 2034.
Daniel Bresette, president of the Environmental and Energy Study Institute, commented on the role of tax incentives in shaping U.S. energy policy: “U.S. energy policy has been largely oriented towards the tax code. That’s how a lot of the renewable energy deployment that’s happened to date has come about.”
Balancing Growth with Climate Goals
As the U.S. continues to lead the world in oil production, it also faces the challenge of balancing its economic reliance on fossil fuels with the pressing need to reduce carbon emissions. The Inflation Reduction Act and other policy measures aim to transition the U.S. toward a more sustainable energy future, but the path forward will require careful navigation of both economic and environmental priorities.
