U.S. Oil Industry Cuts Threaten to Stall Production Surge

8 September 2025

A drone view of a pump jack and drilling rig south of Midland, Texas, U.S. June 11, 2025. REUTERS

The oil business in the United States is hitting a sharp bend as companies begin to scale back aggressively. Layoffs, slashed spending, fewer active rigs and weakening investment are all pointing toward a slowdown. Industry insiders warn that this pullback could interrupt the rapid output growth that’s made the U.S. a global heavyweight in oil production.

Major producers such as ConocoPhillips and Chevron have laid off thousands of workers as they try to trim costs in response to weaker oil prices and rising expenses. Service firms like SLB (formerly Schlumberger) and Halliburton are also reducing staff and scaling back operations. The spending cuts are steep. Excluding some of the very largest oil majors, many U.S. producers have reduced capital expenditures by roughly US$2 billion.

Rig count and frac-spread metrics offer a measurable through-line for what all this means. According to analysis, the number of rigs operating has fallen significantly, and frac spreads which measure equipment used for fracking have also dropped. The decline in these leading indicators suggests that production gains this year may be far more modest than many had projected.

The push to cut comes during a time when oil prices hover around US$62 per barrel, a level below what many producers consider necessary to justify or sustain full drilling operations. Estimates suggest that oil prices would need to stay closer to US$70-75 per barrel to make many fields economically viable. With prices lingering under that threshold and costs of inputs like steel and equipment rising, the calculus for further investment looks riskier.

Another complicating factor comes from consolidation in the sector. Companies are merging, shedding overlapping divisions, or otherwise attempting to gain efficiency. However, consolidation often brings delay and friction. Decision-making slows, and projects once considered revenue boosters are being postponed or canceled altogether. It’s not just about saving money now it’s about deciding which drilling, which fields, and even which pipelines get built.

Energy analysts caution that the production outlook for the U.S. could shift from growth to stagnation or even contraction if the current trends persist. While U.S. oil output set records in 2024, expectations for 2025 are being revised downward. Some forecasts say that onshore output growth may be the smallest annual increase in years. Other estimates are more pessimistic, suggesting output could drop by 300,000 barrels per day compared with last year if investment doesn’t rebound.

Geopolitical pressures and trade policies only intensify the strain. Tariffs especially on steel, casing, and other essential materials are adding to input costs. Supply chain constraints are being felt more acutely. Producers also face disruptive global competition from OPEC+ countries ramping up production, which pulls down international prices and increases market volatility.

For U.S. energy policy and strategy, this moment may be pivotal. The past few years have been marked by talk of “energy dominance,” with domestic production capacity serving as a pillar of geopolitical strength. Slowing growth or worse, declining output could undercut those ambitions. It could also shift global dynamics in favor of traditional large producers abroad.

To reverse course, companies will need oil prices to rise, demand to stay steady, and capital to flow back in. Innovations in cost reduction, efficiency, and perhaps renegotiation of supply chains might offer relief. But until producer economics stabilize, the U.S. oil industry looks likely to hunker down, prioritizing survival over expansion.