Crude oil production from the United States averaged approximately 5.48 million barrels per day in January 2011, much less than the country consumes. The bulk of this domestic production comes from just a handful of states where the oil and gas industry has been operating for generations. Here are the six states that produce the greatest amount of crude oil. (To read more about oil, see How Does Crude Oil Affect Gas Prices?)
It's no surprise that Texas is the largest domestic producer of oil as this state has had a culture associated with the oil business for more than century. Many historians trace the beginning of the modern oil era to the famous Spindletop well drilled near Beaumont, Texas in 1901. The well blew out and reportedly produced 100,000 barrels of oil per day until it was brought under control nine days later.
In January 2011, crude oil production in Texas averaged 962,338 barrels a day. Like other areas of the United States, this production peaked a generation ago and then entered a long-term decline. Since 2004, however, production leveled out and has been stable since that time. The oil industry is currently focused on increasing Texas oil development from the Eagle Ford Shale, the northern part of the Barnett Shale, and the Permian Basin. (For more, check out What Determines Oil Prices?)
Alaska is the second-largest oil producer of crude oil with average daily production of 670,553 barrels in February 2011 (includes natural gas liquids). The state was a relatively minor source of domestic production of crude oil until the discovery of oil in the North Slope in the 1970s. Production from the Prudhoe Bay field and other fields began in 1977 and at one point comprised 25% of all U.S. oil production.
Unfortunately for the United States, Alaskan oil production has been in a steep decline since the late 1980s when production peaked at over two million barrels per day. This will probably continue declining as the industry is focused on other areas that are easier to develop.
Some might find it odd that California is the third largest producer of crude oil in the United States, as this state has a reputation as ground zero for the environmental movement.
Things were much different in the middle of the 19th century, as the oil industry in California began with operators building tunnels or pits to get at the oil, much of which seeped to the surface. The first successful oil wells were drilled in the 1860s and the industry hasn't stopped since.
In December 2010, California reported average daily production of 536,800 barrels of oil from both onshore and offshore areas. This doesn't include offshore production from the Outer Continental Shelf that is regulated by the federal government, which typically averages about 35,000 barrels per day.
The state's largest oil field is the Midway Sunset field which averaged production of 85,100 barrels per day in December 2010. (To learn more on how California drills for oil, read A Primer On Offshore Drilling.)
4. North Dakota
North Dakota has the honor of being the fastest-growing state oil producer over the last few years, as it has seen oil production increase from less than 100,000 barrels per day in 2005 to the 348,367 barrels per day reported in February 2011.
This amazing growth has been powered by the development of the Bakken formation in the Williston Basin and other areas of the state. There are currently 172 rigs drilling in North Dakota with 95% of these rigs targeting the Bakken and Three Forks formation.
Although there is considerable debate on where oil production from the Bakken will peak, one might want to look at the capital plans of the pipeline companies. These operators are planning on increasing takeaway capacity in the area to one million barrels per day by 2015.
5. New Mexico
New Mexico is the fifth-largest domestic oil producer with average daily production of 177,815 barrels per day in 2010. The state is a relative newcomer to the business compared to other top producers, with the first successful commercial oil well drilled in 1924.
Oklahoma comes in sixth in oil production, with average daily production of 147,341 barrels per day in 2010 (through November). The oil industry in Oklahoma also has a long and storied history with the Nellie Johnstone No. 1 well near Bartlesville kicking off the beginning of a boom in 1897. Oklahoma was also where Jean Paul Getty got his start in the oil business in the early 1900s. Getty later went on to run the Getty Oil Company and became one of the first billionaires in the United States. (For more on the Getty Family, check out The Getty Oil Takeover Fiasco.)
The Bottom Line
A handful of states are responsible for much of the domestic oil production in the United States, and these states have a long association with the oil industry, dating back more than a century. For as long as the world continues to heavily rely on oil (and for as long as oil lies beneath U.S. soil) these six states can count on big profits from the oil fields for years to come. (For more on oil, read Oil As An Asset: Hotelling's Theory On Price.)