Fracking, or hydraulic fracturing, is an oil extraction technique that involves high-pressure water blended with sand and chemicals, forced into underground rocks known as shale to capture oil and gas. The process was revolutionized by horizontal drilling in the 1980s and 2000s, transforming America into the world's largest oil producer overnight.
American shale drillers have shown how quickly they can boost oil production over the years. But after several years of divestment and decarbonization, the days of fracking roaring back to life are over.
Halliburton Co.'s CEO Jeff Miller confirmed this to analysts during a conference call Tuesday. He said the oilfield equipment market is so tight that oil explorers are already discussing 2023 projects.
Miller said oil companies don't have enough fracking equipment for newly leased wells this year. He said diesel-powered and electric equipment are in short supply, "making it almost impossible to add incremental capacity this year."
This development is another setback for the Biden administration's efforts to increase US oil production to ease the worst inflation in forty years ahead of the midterm elections in November.
A similar message was conveyed by Exxon Mobil, whose CEO said that global oil markets might remain tight for another three to five years primarily because of a lack of investment since the pandemic began.
Chief executive Darren Woods said it'll take time for oil firms to "catch up" on the investments needed to ensure enough supply.
Back to the shale patch, where even if exploration companies were to obtain fracking equipment for drilling new or existing wells, the frack sand used to blast through shale rocks is in short supply across Texas.
Russell Hardy, the CEO of the world's largest independent oil merchant, Vitol, also believes oil prices will remain high because the market can't see where additional supply is coming from to balance demand.
Meanwhile, Brent oil prices rose to $106 on Tuesday after President Biden returned from Saudi Arabia without an agreement on increasing output from OPEC+.
"The message is that it is OPEC+ that makes the oil supply decision, and the cartel isn't remotely interested in what Biden is trying to achieve," said Naeem Aslam, the chief market analyst at Avatrade.
Neither US shale nor OPEC+ appears to be increasing output in the immediate future for their own respective reasons, indicating tight crude supplies will keep energy prices elevated and inflation high.
All the Biden administration can hope for now is a recession to curb consumer demand to rebalance markets.