On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) meets to decide whether to hold the line or cut its output, no longer afraid that their policy decisions might provoke a surge in shale production in the way they did in the years before the pandemic.
The sidelining of US shale means consumers around the world may face a winter of higher fuel prices. Russia has threatened to block oil sales to countries supporting a European Union price cap, and the United States is winding down releases from emergency oil stockpiles that helped cool energy inflation.
US shale production costs are soaring and there is no sign that tight-fisted investors will change their demands for returns rather than investment in expanding drilling.
During a decade of stunning growth, shale consistently defied production forecasts, and opposition from environmentalists, as technology broke open more and more shale plays and revolutionized the global energy industry.
But there appears to be no new industry-transforming technologies in the works or cost-savings that could change the picture this time around. Inflation has pushed up costs by up to 20%, and less productive wells are crimping the industry's ability to produce more.
Industry spending on new oil projects, said analysts last week at Morgan Stanley is modest at best and the absolute level of investment is still historically low.
Shale has proven naysayers wrong in the past. After the 2014-2016 OPEC price war put hundreds of oil companies into bankruptcy, shale innovated with less expensive ways of operating. Their subsequent gains gave the United States by 2018 the title of world's largest crude producer, a distinction it still holds.
Shale can't come back to become a swing producer, because of the investors' unwillingness to finance growth. The demand for payouts and repeated price busts has forced oil producers and service companies to cut back on science projects that fed past production breakthroughs.
The industry also has less time to regain its former leadership, said Hess Corp CEO John Hess. He estimates rivals have about a decade of running room before they fizzle out. Shale is no longer in the driver's seat with OPEC regaining control over the market, said Hess.
Shale's waning influence is clear in North Dakota. Once the vanguard of the US shale oil industry, poor well productivity in the state's Bakken region and labor shortages have left it far from its boom days.
As the number of prime drilling locations decline across all shale fields, the outlook is grim. Shale production declines rapidly after peaking compared to conventional oil wells, falling about 50% after the first year.
The Permian Basin of west Texas and New Mexico, the largest and most important US oilfield, is the only US shale region to exceed its pre-COVID-19 pandemic oil production levels, according to US Energy Information Administration data. Even that field is showing signs of stress.
