MW The shale boom that made the U.S. the world's top oil producer is nearing a crucial turning point

By Myra P. Saefong

What's unfolding is a maturing shale-oil system and Venezuela could be a key for the future of U.S. output

The U.S. shale boom is running out of steam, making Venezuela's vast reserves look attractive to some U.S. oil companies.

The shale-oil revolution that transformed the U.S. into the world's top oil producer is entering a new phase - one that could see America's hard-fought lead in energy erode in fewer than five years as oil production growth peters out.

The issue is a simple one. Shale well output declines rapidly. On average, a well produces roughly 80% of its total output within the first two years, and production from a typical new well in the Permian's Midland Basin plunges nearly by 90% after three years, according to the American Petroleum Institute.

In other words, maintaining output requires constant drilling and reinvestment.

With production growth expected to plateau by the end of the decade, U.S. energy companies are increasingly weighing longer-lived supply sources.

Rebecca Babin, managing director at CIBC Private Wealth, said growth in a $60 to $80 a barrel crude price environment is already slowing relative to the last 15 to 20 years.

That dynamic "naturally pushes companies to look beyond domestic shale," she said.

Venezuela stands out because of the scale of its reserves and the characteristics of its crude, said Babin - a combination that differentiates it from many other global basins.

The U.S. may be the world's largest producer of oil but much of that output is light, low-sulfur crude that many domestic refineries aren't optimized to efficiently process.

Venezuela's oil, by contrast, is viscose, high-sulfur, crude - closer to the grades many Gulf Coast refiners were originally designed to handle. That compatibility makes Venezuelan barrels commercially attractive to U.S. refiners.

What's unfolding is a maturing shale system. The most productive acreage tends to be drilled first, and as prime locations are depleted, companies face higher costs and lower returns. When crude prices soften, drilling activity slows more quickly than it did during the boom years, said Jay Young, founder and chief executive officer of King Operating Corp.

Any fresh moves into Venezuela, however, would "depend heavily on social, legal, and political conditions," said Babin. "If those hurdles become more favorable, it's certainly an area companies will be actively assessing as part of a broader, long-term growth strategy."

Dependency on shale

Energy independence has been such a defining feature of the U.S. economic story over the past two decades, said Babin. The U.S. became a net energy exporter - meaning its exports outpaced imports - in 2019 for the first time since 1952, according to the U.S. Energy Information Administration,and oil production reached a record high in 2025.

Much of that growth came from unconventional drilling, including hydraulic fracturing and horizontal drilling from geologic formations such as shale rock.

Producers can offset some of the rapid declines in output associated with shale drilling from existing acreage (i.e., "squeezing more barrels out of what they already drill"), said Rich Tabaka, president of Allied Resource Partners, an independent oil-and-gas company. But it can "feel like a bust because shale production falls off a cliff right away," he said.

Still, for firms seeking larger, longer-live reserves, international projects can play a role.

"Venezuela could absolutely be a big option play for a multiyear timeline" because it's got a lot of oil, Tabaka said.

Big caveats

Recent U.S. licensing activity tied to Venezuelan oil has created a potential pathway for limited investment, King Operating's Young said. That could create a pathway for investment.

The U.S. Treasury Department on Feb. 10 issued new and amended general licenses that are expected to help make energy exploration and production in Venezuela a bit easier, including "authorizing certain activities involving Venezuela-origin oil."

Rebuilding Venezuela's energy sector, however, would be a "multiyear, multibillion-dollar project," Young said, requiring stable rules, contract enforcement, and sanctions clarity. "Energy does not move on neat calendars," he said. "Venezuela could contribute meaningful supply over time, but it's not a switch you flip to replace shale declines on schedule."

Political risk remains a central obstacle. Exxon Mobil Corp.'s (XOM) Chairman and CEO Darren Woods said in January that Venezuela is currently "uninvestable" under existing "legal and commercial constructs" frameworks.

Steve Hanke, professor of applied economist at Johns Hopkins University, agreed that Venezuela remains unattractive to most major producers, citing longstanding political and policy instability.

While interim authorities have moved to ease some restrictions on private investment, Secretary of State Marco Rubio acknowledged, before a Senate Committee last month, that additional reforms would likely be needed to attract significant investments.

Market conditions complicate the outlook, U.S. benchmark West Texas Intermediate crude (CL.1) fell nearly 20% in 2025, and was trading near $63 a barrel, while global benchmark Brent crude (BRN00) trades near $68. Analysts say a sustained sub-$60 price environment would pressure U.S. onshore producers and discourage capital investment, particularly in higher-risk regions.

A sub-$60 price environment would not be a market "where companies are looking to deploy significant amounts of capital, especially into projects with uncertain returns," said Matthew Bernstein, vice president of North America oil and gas at Rystad Energy.

Large cap producers are unlikely to commit quickly to rebuilding Venezuelan output, Bernstein said, given portfolio constraints and capital concerns.

Without some clarity, Bernstein thinks the companies most likely to be more interested in going into Venezuela would be outside of the large cap and majors.

He said he's been seeing "some interest from private equity, private investors that have higher risk tolerance and have a bit of a different business model."

For now, U.S. shale remains the backbone of American oil supply. But as growth slows and global dynamics shift, companies may find that the next chapter of energy security looks much less straightforward than the past 25 years.

-Myra P. Saefong

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February 16, 2026 08:07 ET (13:07 GMT)

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