Why “drill more oil” isn’t simple fix as prices surge?

With oil prices climbing back above $110 a barrel amid geopolitical tensions, the question seems straightforward: why not just drill more? But as global markets tighten, the answer remains anything but simple.

Despite the price surge following the breakdown of negotiations linked to the US-Iran tensions and continued disruption around the Strait of Hormuz, oil producers are already operating near maximum capacity. Storage is constrained, refineries are stretched, and new drilling projects take years — sometimes decades — to yield results, according to CNN.

The economics are equally complex. New wells drilled today may not produce until the 2030s, making them viable only if prices remain sustainably high, typically above $90 per barrel. While Goldman Sachs expects prices to hold above that level through the end of the year, long-term certainty remains elusive.

“Time to drill, baby, drill?” Perhaps — but the industry faces structural constraints that limit how quickly supply can respond, CNN notes.

Global oil majors are now reassessing geographic risk. The war in the Middle East has underscored the vulnerability of concentrated production.

“The war on Iran is likely to prompt a rethink of the geopolitical value of production outside the Middle East,” Luisa Palacios, former Citgo chairwoman and current managing director of Columbia University’s Center on Global Energy Policy told CNN. “However, it is not as straightforward as this high level of prices suggests.”

Diversification requires long-term investment and confidence in future demand. Yet bottlenecks persist, particularly in refining. In the United States, capacity has stagnated for decades, with several facilities closing due to environmental regulations and rising costs. The last major refinery built in the country dates back to 1977.

At the same time, the U.S. shale boom is losing momentum. Analysts warn that the most productive reserves — so-called “tier 1” oil — are being depleted. KPMG estimates that the U.S. could reach “peak shale” production as early as 2027.

“We’re running out of top-tier inventory,” said Angie Gildea, KPMG’s global head of oil and gas. “Barring new technology, you need to be able to find new crude somewhere else.”

Globally, the challenge is even more pronounced. The world’s 30 largest oil exploration and production companies could see output decline by nearly 40% between 2025 and 2040, according to Wood Mackenzie. That would leave a shortfall of roughly 300 billion barrels against projected demand through 2050.

This gap is creating opportunities in regions like Latin America, which already accounts for about 10% of global oil output and faces fewer geopolitical chokepoints. Countries including Brazil, Guyana and Argentina are expected to add significant production, while Venezuela — despite longstanding challenges — is re-emerging as a potential growth market.

Still, expansion carries risks. Exploration is costly and uncertain, with some recent high-profile drilling efforts yielding no results.

“The first four big wells we tracked in 2026 came in dry – that’s the game, and players know the risks,” said Andrew Latham, senior vice president of energy research at Wood Mackenzie.

There are also concerns that high prices could curb demand. Rising energy costs are accelerating the shift toward renewables, particularly in major markets like China, potentially limiting long-term oil consumption.

For now, many U.S. producers are focusing on maximising output from existing wells rather than embarking on expensive new projects. As Dan Pickering of Pickering Energy Partners notes, the industry may prioritise short-term gains over long-term bets in an increasingly uncertain market.

In a world of volatile geopolitics, constrained infrastructure and shifting demand, simply drilling more oil is no longer a quick or guaranteed solution.

By Sabina Mammadli