If oil is in such short supply, why can’t we simply drill more of it?
The answer for the past couple months has been consistent: Oil producers are operating at maximum output, there’s nowhere to put the crude they’re extracting, refineries are at or near max capacity, and it just doesn’t pay to explore and drill new wells.
The underlying challenge is that oil drilling is a complex and expensive process that takes years to come to fruition. Wells drilled in 2026 may not start to produce until 2036. That kind of long-term investment makes financial sense only if oil prices sustain above $90 a barrel.
Well.
Oil is back above $110 after negotiations between the United States and Iran broke down. The Strait of Hormuz shows no signs of reopening anytime soon. Goldman Sachs last month said it expects oil prices to remain above $90 a barrel through at least the end of the year.
