Consider This… Who Will Pay for North America’s Energy?
North America possesses an extraordinary oil & gas resource endowment. The larger question raised in our new paper, Consider This… A Perception of Financial Status, is who will pay to develop and sustain it.
Will investors and bankers be expected to replace capital that production has failed to recover? Or will the revenues earned from consumers cover the full cost of providing the energy on which their prosperity depends?
Energy prices matter to households and businesses. So does the financial capacity to maintain reliable supplies. An economy cannot preserve affordable energy indefinitely by consuming the capital, equipment, skills and organizational capabilities needed to produce it. Shortages, greater dependence on foreign supplies and constraints on the potential of Artificial Intelligence and an Information Technology industrial revolution would carry their own substantial costs.
This paper asks whether oil & gas has allowed its remarkable technical accomplishments to obscure its commercial responsibilities.
Engineers and geologists have transformed the resource base available to North America. Their achievements deserve recognition. The business surrounding those achievements must also recover its investment, earn competitive profits and finance the next generation of production. An industry capable of producing record volumes still has to demonstrate that it can pay for their replacement.
The “leaky bucket” analogy illustrates the challenge.
Between December 2023 and December 2024, crude oil production from existing Lower 48 wells declined from 11.0 million to 6.7 million barrels per day. New wells therefore had to replace 4.3 million barrels per day—approximately 39% of the starting production rate—before contributing to growth. This was the decline from the existing wells, not a 39% fall in total production. EIA: production declines from existing wells.
Keeping the bucket full requires continuing investment. The commercial question is whether the contents being sold generate enough money to pay for that effort.
The Permian demonstrates how consequential this question has become. In 2025, the region supplied approximately 48% of U.S. crude oil production, averaging 6.6 million barrels per day. Its production increased by 280,000 barrels per day, accounting for most of the country’s annual growth. That increase was achieved after replacing the region’s declining production. The net addition alone does not reveal the scale or cost of the replacement work beneath it. EIA: U.S. oil production in 2025
Natural gas presents an equally substantial replacement requirement. Existing Lower 48 wells lost 27 Bcf per day of production between December 2023 and December 2024. For perspective, Canada’s entire natural gas production averaged approximately 18.3 Bcf per day in 2024. The decline being replaced in the Lower 48 exceeded the output of Canada’s whole gas industry. EIA: existing-well declines; Canada Energy Regulator
By December 2024, total Lower 48 gas production reached 116.5 Bcf per day. Using our approximate conversion of six thousand cubic feet per barrel of oil equivalent, that represents roughly 19.4 million barrels per day of oil-equivalent energy. Its importance to the economy deserves to be matched by commercial discipline over its production.
Our concern is that the financial bucket leaks as well. When production does not recover its full commercial costs, reserves are consumed while capital remains outstanding. Subsequent production must carry that unrecovered burden alongside the cost of further investment. Reported earnings do not, by themselves, establish that the money has been recovered within a competitive period.
I have been discussing this problem since the 1990s. Too often, the response still amounts to the same sequence of expectations: investors invest, producers spend, production increases, and the industry waits for better prices. Rinse, repeat. “We’re just waiting for the investors to return.”
The paper challenges that sequence and presents Synallagi as an organizational response. Its breakeven calculations identify the actual operating costs, overhead and competitive capital recovery required by each well, property and Joint Operating Committee interest. Its price maker strategy uses that information alongside the market price to support each producer’s independent decision about whether production is profitable.
Accounting supplies engineers and geologists with another essential tool: a clear account of the financial consequences of their decisions. That information can help them identify anomalies, improve performance, preserve reserves and demonstrate the commercial value of their innovations.
North America’s energy independence must include the ability to finance its continued production. That requires profitable operations, a capable service industry and the repeated recovery and reinvestment of capital. Waiting for a more favourable price cannot substitute for establishing those conditions.
I have written A Perception of Financial Status to make the problem explicit and present a proposed way forward. The objective is an industry capable of earning the resources needed to sustain its technical achievements and meet society’s requirements. The responsibility to begin that work rests with the leadership making today’s decisions.
