US oil production set to eclipse previous record despite climate push

US oil production is on course to break pre-pandemic records next year, a government agency has forecast, complicating the Biden administration’s ambitions to shift the country away from fossil fuels.

Output is likely to rise to a fresh annual high of 12.4m barrels a day in 2023, the Energy Information Administration said on Tuesday, eclipsing the previous record volume of 12.3m b/d set in 2019. US natural gas production will also set new records over the next two years, the independent statistics agency said.

It marks a stark reversal for an oil and gas industry that was sent into freefall by the pandemic-driven economic downturn, and defies widespread predictions that the country’s oil industry would not recapture peak production levels.

The forecast comes as higher energy prices spark new investment in developing oil and gasfields. The EIA expected Brent crude oil prices to average $75 a barrel this year and $68 a barrel next year — lower than spot prices, which suggests production could climb even in a weaker commodity market.

While the Biden administration has promised a long-term shift away from fossil fuels, it has recently leaned on the domestic oil sector to lift output to help cool a rally in motor fuel, where prices last year reached their highest levels since 2014.

The expected supply rebound comes even as many of the largest US oil and gas producers have shifted their focus over the past two years away from maximising output growth and towards rewarding shareholders.

Line chart of US crude production, m barrels per day showing America's oil production to reach new highs

Many of the nation’s top producers, including ConocoPhillips, EOG Resources and Pioneer Natural Resources, are setting up new dividend schemes and using cash to buy back their own shares, rather than drill more new wells.

Analysts say the next wave of production growth will instead be led by smaller producers, often family-owned or backed by private equity, which are not under the same shareholder pressure to trim growth.

The EIA also predicts carbon emissions from the energy sector will continue to rise through 2023 after strongly rebounding in 2021 from a sharp fall during 2020.

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Emissions jumped 6.2 per cent in 2021 and are expected to rise another 1.8 per cent and 0.5 per cent in 2022 and 2023 to 4.97m metric tonnes, although total emissions remain below 2019 levels.

The Biden administration is pushing hard to green America’s energy system, funnelling billions of dollars into clean energy technologies and pushing the roll out of wind and solar power. But the fresh government forecasts indicate it is unlikely to see meaningful progress in reducing emissions during President Joe Biden’s first term in office.

The EIA forecast that US natural gas output would rise to a record 97.6bn cubic feet per day in 2023, from 93.5bn last year, which will help propel the US past Australia and Qatar to become the world’s largest exporter of liquefied natural gas.

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