Between 2035 and 2040, US oil and gas production is projected to decline by 1.7 million boe/d, with an equivalent increase in low-carbon energy production, Wood Mackenzie forecasts.
However, China is rapidly outpacing the US in low-carbon technology growth. China leads in supply chains for lithium-ion batteries, EVs, and solar cells, with a market share far surpassing the US’s dominance in oil and gas. This growth is driven by strategic planning and government support aimed at reducing energy imports and air pollution.
While the US excels in oil and gas, China’s strength lies in large-scale, cost-effective manufacturing, which it uses to revamp its energy system and build a global export industry. In 2025, China’s exports are expected to make up 20 percent of the global EV market and 30 percent of the global market for vehicle and energy storage batteries, excluding domestic sales.
ACTION PLANS
The US could maintain or enhance its global leadership in oil and gas production by reviving the key drivers of the shale boom—innovation, exploration, and supportive regulation — which could result in stronger output than current projections suggest. In the Permian Basin, major oil companies are testing advanced technologies, including AI-driven subsurface diagnostics and reservoir modeling, to reduce costs and improve efficiency.
ExxonMobil is leading efforts to redesign wells and pads in real time, aiming to eliminate unproductive capital spending. If successful, these innovations could lower unit costs and unlock more undrilled inventory. Some independent operators remain cautious but could benefit by adopting similar data-driven approaches. Reducing breakeven costs by $5 per barrel is seen as achievable, potentially keeping tight oil projects globally competitive and sustaining the Permian’s production outlook.
Exploration spending in the shale sector has dropped 65 percent since 2012, raising concerns about the depletion of top-tier well inventory, with projections suggesting nearly half of remaining low-cost tight oil locations will be drilled within a decade. While plays like the Utica, Uinta, and deeper Permian zones show promise, more effort in derisking, delineation, and midstream investment is required to fully capitalize on these opportunities.
Gas inventory is being consumed more slowly than oil, but growing demand will make identifying new gas production sites increasingly important. Infrastructure has not kept pace with shale’s growth, especially long-haul interstate pipelines, leading to price discounts that hinder investment.
Regulatory changes, including faster permitting processes, reduced royalty rates, and expanded tax deductions like intangible drilling costs and depreciation allowances, could enhance project economics. However, the already favorable US fiscal terms may limit the impact of such incentives.
Ongoing cost reductions and new resource discoveries could strengthen the US position among global oil and gas producers, but heavy reliance on upstream risks leaving the country vulnerable as the global energy transition accelerates. China’s growing dominance in low-carbon technologies challenges US leadership, especially as electrification of transport and increased use of renewables and nuclear energy put downward pressure on fossil fuel demand and prices.
To stay competitive, the US must maintain the flexibility to shift quickly into lower-emissions solutions like carbon capture when needed. While the growth of the US upstream sector is promising, the energy landscape is evolving rapidly, and continued leadership requires proactive adaptation, Wood Mackenzie said in its report.
Baburajan Kizhakedath