Gas prices are skyrocketing. So why aren’t American oil companies drilling more?

As the United States and Iran battle for dominance in the Strait of Hormuz, U.S. gas prices continue to rise – and production may not keep up.

By Stephanie Pappas edited by Andrea Thompson

The closure of the Strait of Hormuz has blocked a fifth of the world’s oil supply in the Persian Gulf, a crisis that the World Bank Group predicted Energy prices will drive energy prices up 24% in 2026 – the largest increase since Russia invaded Ukraine in 2022. And the United States is not immune. Although it’s a major producer of oil and gas, domestic production won’t help curb rising pump prices — currently around $4.50 a gallon nationally — anytime soon.

Soaring oil and gas prices are causing headaches for consumers who fill up their cars or pay for more expensive deliveries, but U.S. oil and gas companies are making windfall profits. That may seem like an incentive to drill more, but the lessons learned from previous oil shortages and geological hurdles to increased drilling — not to mention continued uncertainty — tell a more complex story.

“This volatility really bothers people,” says Trey Cowan, an energy finance analyst at the energy market analysis firm Institute for Energy Economics and Financial Analysis.

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Oil and gas experience repeated boom and bust cycles. Price is one of the determining factors in how much oil is drilled by domestic producers, but it is not the only one: Historically, technology has played an even larger role in how much oil is extracted from the ground. For example, the global average price of a barrel of oil soared nearly 300 percent in 1974 due to the 1973 oil embargo, in which the Organization of Arab Petroleum Exporting Countries (OAPEC) banned exports to countries that supported Israel in that year’s Yom Kippur War. American producers have intensified their activity, but production never exceeded the peak reached in 1970, and drilling technology then could not access the difficult-to-access deposits that remained. In the late 1990s and early 2000s, crude oil prices increased alongside those of other commodities. But U.S. domestic production continued to decline until new drilling technologies sparked a boom in shale oil production in the 2010s.

Deposits previously too difficult to reach could be exploited because producers could now drill horizontally through rock layers and then stimulate the flow of oil through hydraulic fracturing. But the “shale revolution” has shown how volatile oil prices can be. The Organization of the Petroleum Exporting Countries (OPEC) refused to cut production in response to the new oil glut in the United States, causing prices to plummet 70% between 2014 and 2016. Investors burned by that collapse are still hesitant to put money into oil and gas a decade later, says Brandon Davis, founder of AFE Leaks, a consulting firm that tracks the costs of investing in oil and gas. Labor and materials are also more expensive today due to inflation, Cowan says.

In the long term, a large increase in new drilling in the United States should not be expected. “Oil companies generally don’t react to economic conditions caused by policies that may be temporary,” says Patrick De Haan, head of oil analytics at GasBuddy, an app that tracks gasoline prices for drivers. It takes six months or more to get full production from a new well, Cowan says, so producers who make these decisions have to think about the cost of fuel months down the road. Oil futures markets currently forecast that by October, West Texas Intermediate crude will cost less than $90 per barrel, compared to more than $105 per barrel today. But the World Bank and Barclays have revised upwards their gas price forecasts for the rest of the year. “The longer this goes on, the worse it gets,” says Davis, who thinks markets are too optimistic that the Strait will soon reopen. He believes prices should be even higher than they are now.

Nor will increasing production make up for the current deficit. Much of the country’s shale production has been exploited, leaving less productive and less profitable deposits. All American production or approximately 13.6 million barrels of oil per daycompared to the 20 million barrels per day that are trapped by the war in Iran.

So far, major companies like ExxonMobil and Chevron are sticking to their drilling plans from before the U.S.-Iran war, according to recent executive statements. Smaller private producers, however, are starting to consider accelerated drilling, Davis says. For example, Oklahoma City-based Continental Resources announced in April that it would add rigs. And on Monday, Diamondback Energy, which operates in Texas and New Mexico, pledged to pump 3% more oil than planned this year.

There is one major difference from past price spikes: cheap renewable energy is an available alternative that was not as accessible in the past. Wind and solar power generated 17% of U.S. electricity in 2025, according to the U.S. Energy Information Administration, a government agency that tracks energy statistics. This baseline level of renewable energy reduces demand for fossil fuels in the utility sector. “Renewable energy allows us to cope with the speed at which energy prices are rising,” says Cowan.

But the relief is limited. Americans spend about half a billion dollars more on fuel each day than they likely would have spent if the Iranian conflict had not occurred, De Haan says. “Ultimately,” he says, “it’s a simple economic question. Prices are going up because there has been a drastic reduction in supply.”

Disclosure: The reporter’s wife works in the oil and gas industry and has interests in wells.