Gulf War Fire Pushes Oil Prices Higher, U.S. Shale Oil Executives Warn: War Gap Cannot Be Made Up

U.S. shale oil industry executives warn that as Middle Eastern oil supplies are disrupted, American shale companies cannot quickly increase production to fill the gap because significant output increases often take months to achieve.

Scott Sheffield, former CEO of Pioneer Natural Resources, said that until it is confirmed that oil prices can sustain their upward trend, producers will hold back from adopting costly new drilling plans.

Sheffield added that a lack of high-quality drilling blocks will also hinder expansion. Over the past 12 months, oil prices have remained low, leading companies to cut capital expenditures, shut down some drilling rigs, and lay off staff.

“This (rising oil prices) will only bring more cash flow. They can reduce debt, buy back shares, and pay dividends. Once the war ends, prices will quickly fall back. The drilling inventory available to each company is running out… I don’t expect anyone to add rigs.”

Due to market concerns over supply disruptions in the Gulf region, Brent crude futures briefly rose above $85 per barrel, the highest level since July 2024.

As the conflict escalates, some large oil fields in Iraq and major natural gas export facilities in Qatar have been shut down. Trump said Tuesday that if necessary, the U.S. Navy will begin escorting oil tankers through the Strait of Hormuz.

Goldman Sachs and the International Energy Agency (IEA) warned that if Gulf supply disruptions persist, oil prices could surge past $100 per barrel, increasing fuel costs and inflation, and dragging down global economic growth.

However, the Trump administration remains relatively calm. U.S. Energy Secretary Chris Wight said, “Currently, global oil supply is very ample, giving Trump greater leverage in geopolitical actions, and there’s no need to worry about oil prices soaring wildly.”

The IEA held an emergency meeting on Tuesday to assess the situation and released a report stating that U.S. shale oil will be the “most important” short-term source to fill the supply gap. The IEA also mentioned that U.S. oil wells could add about 400,000 barrels per day in the second half of the year.

However, compared to the approximately 20 million barrels per day exported from the Gulf region, this is still a small amount. The U.S. Energy Information Administration (EIA) recently forecast that U.S. production, currently at a record high of about 13.6 million barrels per day, may decline this year.

Analysts say that even if oil prices rise, reversing this trend will take longer. JPMorgan analysts stated, “U.S. shale oil can respond, but additional supply takes months because drilling, completion, and infrastructure all have cycles.”

Long-term producers experienced in market volatility tend to watch how high oil prices can go and how long they can stay there.

Kirk Edwards, president of independent producer Latigo Petroleum in the Permian Basin, Texas, said, “It’s still too early to invest recklessly. Permian producers need stable oil prices around $75 for the next 12 months.”

Trump previously promised during his campaign to push oil prices down to $50 per barrel. On Tuesday, he said that the recent spike in oil prices will reverse once the conflict ends. “Oil prices might be temporarily high, but I believe they will fall once the war ends, even below previous levels.”

Investors remain cautious. Cole Smead, CEO of Smead Capital Management, said, “Producers lack trust in market sentiment and political rhetoric shaping oil price expectations.”

The firm holds shares in several Permian producers, including Diamondback Energy and Western Oil. Smead said, “The only thing that can prompt them to act in the short term is higher profit per barrel. This conflict is considered temporary. If it ends soon, why rush to expand production?”

It’s worth noting that even if producers cannot immediately alleviate the new global energy crisis, domestic consumers in the U.S. are relatively better buffered.

Daniel Yergin, Vice Chairman of S&P Global, said, “Without U.S. shale oil, this would be an unimaginable crisis; we might see a panic in global oil prices.”