ENERGY SECURITYHow the U.S. Oil and Gas Industry Works

By Lindsay Maizland and Anshu Siripurapu

Published 16 August 2022

The United States is the world’s top producer of oil and natural gas. The country’s economy runs on these fossil fuels, but producing and burning them releases greenhouse gas emissions that cause climate change. Russia’s war in Ukraine stoked the debate over whether the United States should boost production to strengthen U.S. and European energy independence or reduce production, improve efficiency, and transition to renewables. The U.S. decision to either continue at the current pace of oil and gas production or curb production to achieve its climate goals will have global consequences.

Soaring energy prices in 2022 added fuel to the U.S. debate over the future of oil and natural gas, energy independence, and the fight against climate change. Some observers call for maintaining high production of these fossil fuels, while others urge the Joe Biden administration to keep its commitments to reduce greenhouse gas emissions and transition to renewable energy.

In recent years, the United States has reclaimed its position as the world’s largest producer of oil and gas. But the price of oil is still determined by global consumer demand and the output of other major producers, including Saudi Arabia and Russia. Analysts say U.S. energy policy is at an inflection point that will have global economic, climate, and health consequences.

How Are Oil and Gas Produced?
Oil is also referred to as crude oil or petroleum, while natural gas is more accurately described as fossil gas or methane. (Though it is colloquially referred to as gas, gasoline for cars is a liquid product derived from oil.) Oil and gas, as well as coal, are fossil fuels because they are formed underground over millions of years from the remains of plants and animals. Both are made up of hydrocarbons, molecules of carbon and hydrogen. 

The conventional process for extracting oil and gas involves vertically drilling a well into an underground reservoir. Such wells have operated in the United States since the mid-1800s. Today, most U.S. production comes from unconventional oil drilling because conventional deposits have been largely tapped. The combination of horizontal drilling and hydraulic fracturing (fracking) that took off in the early 2000s has allowed oil producers to unlock previously inaccessible stores. In the process, millions of gallons of water, sand, and chemicals are pumped into wells deep underground, creating fissures in the surrounding shale rock and releasing the trapped oil and gas. This “shale revolution” dramatically increased U.S. oil and gas production.

Also, new technologies have enabled companies to increase offshore oil and gas extraction, which requires drilling at great depth underwater. Still, offshore drilling accounts for a relatively small share of total U.S. oil production, at about 15 percent in 2021 according to the U.S. Energy Information Administration (EIA), and a negligible share of natural gas production. Most offshore drilling in the United States takes place in the Gulf of Mexico.