Running Faster to Stay in Place
The Wall Street Journal highlights the resilience of U.S. oil production, which continues to hover near record highs of 13.5 million barrels per day despite lower prices. But beneath this “boon” for the Trump administration lies a technical reality that is far more fragile than the headline numbers suggest: the “Red Queen” effect.
In Through the Looking-Glass, the Red Queen tells Alice, “Now, here, you see, it takes all the running you can do, to keep in the same place.” This is the perfect metaphor for the US shale industry in 2026. The “resilience” isn’t coming from new discoveries; it is coming from aggressively cannibalizing the best inventory at a pace that cannot be sustained.
The Tier 1 Cliff
The data is quietly alarming. Operators are running out of “Tier 1” acreage - the sweet spots where oil gushes out cheaply. To maintain current production levels, drillers are forced to drill longer laterals (some now stretching 4 miles underground) and use more intense fracking techniques on “Tier 2” rock.
This creates a hidden inflation. Even if oil prices stay stable, the effort required to get the same barrel out of the ground is rising. We are seeing a divergence where efficiency gains (drilling faster) are being canceled out by geological degradation (rock quality getting worse). The “boon” is borrowing from the future; we are draining the easy oil now to keep gas prices low, leaving a much steeper cost curve for 2027.
The Private vs. Public Split
Another non-obvious driver is the behavior of private operators. Public companies (like Exxon and Chevron) are disciplined, prioritizing dividends over growth. But private drillers, creating a “last hurrah” surge to dress themselves up for acquisition, are drilling aggressively. Once these private players are bought out (a trend accelerating in 2026), their production will likely be throttled back by disciplined public owners. The current supply glut is partly an artifact of M&A posturing, not long-term structural capacity.