The U.S. oil and gas industry is riding a line between productivity and paralysis. Crude oil prices have slipped into the mid sixties, rig counts are in decline, frac crews are thinning out, and employment in the sector has hit a ceiling. Natural gas activity has picked up modestly, but it has not been enough to counter the broader slowdown. Companies are more efficient and disciplined than ever, but the price of that discipline is stagnation.
This is not a bust in the traditional sense. Production is still near record highs. Shareholders are happy with free cash flow and stock buybacks. But for the people on the ground, the roughnecks, the pumpers, and the frac crews, there is less work to go around. The machines are better, the margins are thinner, and the field is getting quieter.
Market Conditions and Industry Activity
As of July 2025, West Texas Intermediate (WTI) crude is trading just above $66 per barrel. Brent is sitting near $69. Natural gas has recovered from its early 2024 slump and now trades around $3.60 per MMBtu at Henry Hub, supported by high summer demand and relatively tight inventories.
Despite these moderately supportive prices, drilling activity has slowed. The total U.S. rig count has fallen to 544, down from nearly 600 this time last year. Oil rigs have seen the steepest decline, now sitting at 422, the lowest since 2021. Gas rigs, on the other hand, have climbed to 117, reflecting the improved price environment for dry gas and continued demand growth.
Frac spread counts, which indicate the number of active hydraulic fracturing crews, have dropped to 174, down from over 240 just six months ago. This signals a sharp pullback in completion activity. Even in areas like the Permian Basin, operators are working through previously drilled wells instead of starting new ones. In the Eagle Ford, Anadarko, and Bakken, rigs have been laid down, and service jobs are vanishing.
Natural gas plays like the Haynesville have seen more resilient activity thanks to better price signals, but takeaway constraints and local policy challenges continue to limit their upside.
In short, the machines are still running, but fewer of them. Producers are choosing to harvest what they have already drilled rather than sink more money into the ground.
The Role of Policy, Pricing, and Productivity
Several forces are shaping this restrained environment. First and foremost is price. WTI crude has declined from over 90 dollars in mid 2023 to the mid sixties today. That drop has narrowed margins, particularly for smaller operators and those in higher cost basins. While productivity improvements have helped keep production up, they have not eliminated the pain of lower revenue per barrel.
Producers now require sustained prices in the upper sixties to justify new drilling programs. If crude falls below 60 dollars, many U.S. shale wells become unprofitable. This has kept new investment on a tight leash. The Dallas Federal Reserve’s latest survey of energy executives found that nearly half expect to drill fewer wells in the coming year, even if prices remain steady.
At the same time, policy uncertainty has added another layer of hesitation. Trade tariffs on steel and aluminum have raised the cost of building out infrastructure. Federal permitting delays have slowed project approvals. State-level restrictions on flaring and water use have increased compliance burdens. Add to that growing pressure from institutional investors demanding carbon intensity disclosures and reduced emissions, and the message is clear: do more with less.
Even for the service sector, the challenges are mounting. Companies like SLB have reported revenue declines in their North American operations and are forecasting continued weakness in upstream activity. Frac crews and support labor are among the first to feel the slowdown. The recent drop in spread count shows that operators are trimming expenses by postponing completions or consolidating crews.
And yet, despite all of this, U.S. oil production remains near record levels. This is the result of continued productivity gains. Operators are drilling longer laterals with fewer rigs. They are using advanced data analytics to optimize placement and improve recovery. The same barrel that used to take a dozen people and two rigs to produce now takes half that.
But there is a cost. Fewer rigs mean fewer jobs. Fewer completions mean fewer contractors. Automation is replacing manpower in ways that are efficient but unforgiving. For workers, it means a tighter job market. For towns built on drilling booms, it means more empty motels and less demand at the diner.
What the Road Ahead Might Look Like
If oil stays in the mid sixties, expect more of the same. Rig counts will likely remain soft. Frac spreads may dip further. Employment in oil and gas extraction will hold steady or decline slightly, as companies delay new hires and stretch existing crews. Gas drilling may continue to see incremental growth, but not enough to change the overall trajectory.
If oil dips below 60 dollars, the consequences will be more severe. Activity will drop sharply, rigs will be idled, and service companies will face another round of layoffs. The industry has become resilient, but not immune.
On the other hand, if crude rebounds to the mid seventies or beyond, a cautious recovery may follow. Producers would still face pressure to limit capital spending, but higher cash flow could justify selective rig additions. Completion activity would recover first, followed by moderate increases in drilling and employment. Even then, the pace would be measured.
The wild cards are geopolitical and regulatory. A supply disruption in the Middle East or a shift in U.S. policy could change the math overnight. So could a major recession or collapse in demand. For now, the most likely path is a slow grind forward.
This is not a bust year, but it is not a boom either. It is a year of tight margins, cautious operators, and workers waiting on the next call. The rigs that are running are working harder than ever, and the people who support them are being asked to do more with less. In 2025, that seems to be the rule across the board.
