US Energy Dominance Faces Long-Term Challenges, Wood Mackenzie Report Finds
US oil and gas production to plateau and decline between 2035-2040
LONDON / HOUSTON / SINGAPORE, 17 April 2025 –While the United States currently dominates global oil and gas production, it faces significant challenges to maintaining the same level of leadership in the coming decades, according to the latest Horizons report from Wood Mackenzie.
According to the report “Tough at the top: The threats to US energy dominance”, oil and gas fuels 52% of the world's primary energy. Wood Mackenzie models suggest that this share of supply will remain above 50% for another 20 years.
Currently, the US is the world's largest producer of oil and gas, accounting for 20% of global oil production and 25% of global gas output. But even if demand for oil and gas remains robust for decades, the idea of “US energy dominance” as positioned by the Trump administration, becomes challenging long-term. US production is set to decline in the 2030s and the rise of low-carbon energies across the globe, particularly in China, could potentially leave the US exposed.
"The US has achieved remarkable success in oil and gas production over the past two decades," said Robert Clarke, vice president, upstream research at Wood Mackenzie. "However, maintaining this dominance will require addressing several key challenges, including resource maturation and an ongoing global shift towards lower-carbon energy sources."
Top 10 global oil and gas producers, 2025
Source: Wood Mackenzie Lens; liquids include oil, condensate and NGLs.
The report highlights that US oil and gas production is projected to decline by about 1.7 million barrels of oil equivalent per day between 2035 and 2040. But if demand expectations erode prior to this and a drop towards US$50/bbl becomes embedded for crude, declines would occur much sooner and be more severe.
This decline could have far-reaching implications for the industry's ability to raise capital and maintain export relationships. It would also mean a different value proposition for US upstream that prioritizes value capture from late-life assets, said Clarke.
Simultaneously, China is rapidly advancing in low-carbon technologies such as electric vehicles, battery storage, and solar cells. The report notes that China's global market share in these technologies is now greater than the US share in oil and gas production.
Despite the challenges, the report highlights several ways the US could preserve and prolong its energy leadership.
Fostering innovation collaboration, particularly in shale technology
New technology initiatives in the Permian Basin are tight oil's current wildcard. Innovative subsurface diagnostics and reservoir models – including artificial intelligence (AI) - are focused on lowering the cost of supply by redesigning wells and pads in nearly real time to eliminate non-productive capex. If successful, lower unit costs will open new tranches of undrilled inventory for greater resource recovery.
“If new digital tools can lower breakevens by US$5/bbl, which we think is possible, future tight oil projects will remain as competitive as any other global supply source and extend the Permian Basin's production profile,” said Clarke.
Reinvigorating grassroots shale exploration
Exploration is needed to replenish top-tier well inventory and the sector's exploration spending has been falling precipitously, down 65% since 2012. Within 10 years, Wood Mackenzie models suggest the industry will have drilled nearly half of all its remaining low-cost tight oil locations.
“Play-opening projects in the Utica, Uinta and deeper Permian benches have had good results, but more can be done,” said Clarke. “Derisking, delineation and midstream investment are needed to make the size of these new opportunities as material as existing assets.”
Implementing supportive regulatory and fiscal policies
The Trump administration has embarked on reform of federal permitting frameworks, with the aim of creating a faster path to infrastructure expansion, which could help relieve constraints on long-haul interstate pipeline expansions and boost the profitability of high potential supply projects.
Despite opportunity to extend US oil and gas production, the report concludes that an over-reliance on upstream for too long could leave the US exposed if the world moves towards low-carbon energy.
"The future of US energy sector isn't as clear as it could be," concluded Clarke. "While its oil and gas dominance is likely to continue in the near term, the industry must prepare for a changing global energy landscape. Excitement over the US upstream growth story should not mask the reality that the world does not stand still. Balancing continued hydrocarbon production with investments in low-carbon technologies will be crucial for maintaining America's energy leadership in the long run.”
ENDS
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