Tuesday, August 25th, 2026 and is filed under New Mexico Oil and Gas Investing, Oil and Gas Current Events, Oil and Gas Fun Facts, Permian Basin Oil News, Texas Oil and Gas Investing
When you picture the American oil industry, there’s a good chance Texas comes to mind. Pumpjacks stretching across the horizon, drilling rigs rising above the West Texas landscape, and generations of families whose livelihoods have been connected to the energy industry have all helped make oil part of the state’s identity.
But what state produces the most oil in the United States?
The answer is Texas – and it isn’t particularly close.
According to the U.S. Energy Information Administration (EIA), Texas produced an average of approximately 5.75 million barrels of crude oil per day in 2025. New Mexico ranked second at approximately 2.24 million barrels per day.
Texas didn’t reach that position simply because there happens to be oil beneath the ground. More than a century of exploration, enormous geological resources, infrastructure development, technical expertise, and advances in drilling and completion technology transformed the state into America’s oil-producing powerhouse.
Understanding how that happened provides an interesting look at both the history of the American petroleum industry and the technologies shaping oil production today.
For anyone asking which state produces the most oil, Texas holds a commanding lead.
EIA data show that Texas averaged approximately 5.75 million barrels per day in 2025. That’s more than two-and-a-half times New Mexico’s production.
Texas alone produced roughly 42% of the nation’s record 13.6 million barrels per day in 2025.
That’s a remarkable share for one state.
But Texas’ position at the top of the oil industry has roots stretching back more than a century.
Oil discoveries occurred in Texas during the 1800s, but the event that truly changed the trajectory of the state’s petroleum industry happened on January 10, 1901.
That’s when the famous Spindletop well near Beaumont erupted.
The Lucas Gusher produced approximately 100,000 barrels per day, demonstrating that oil could be produced in Texas at a scale few had previously imagined. The discovery triggered an extraordinary drilling boom, with hundreds of wells crowding Spindletop Hill by 1902. The resulting surge in production helped transform Beaumont into an oil boomtown and accelerated exploration throughout Texas.
Spindletop helped launch the modern Texas petroleum industry.
Other discoveries followed across the state, and over the decades Texas developed something that would become extremely difficult for other producing regions to replicate: an entire economy and infrastructure built around finding, producing, transporting, processing, and refining hydrocarbons.
But another region would eventually become the center of the Texas oil story.
Stretching across West Texas and southeastern New Mexico, the Permian Basin is one of the most prolific petroleum-producing regions anywhere in the world.
Oil producers have been drilling there for generations.
The important distinction is that the Permian isn’t simply one enormous underground pool of oil. It contains multiple producing formations stacked at different depths. Those formations have given operators numerous potential targets across an enormous geographic area.
For decades, conventional vertical wells produced oil from the region.
Then technology changed what operators could economically reach.
That transformation ultimately helped create the modern Texas production boom.
In 2007, Permian Basin crude oil production had fallen to approximately 850,000 barrels per day. By 2013, production had rebounded to approximately 1.35 million barrels per day as producers increasingly developed formations using newer techniques.
The growth didn’t stop there.
By 2025, the Permian Basin, which extends across West Texas and southeastern New Mexico, was producing approximately 6.6 million barrels of crude oil per day. That’s nearly half of all U.S. crude oil production. While a significant portion of that production comes from Texas, New Mexico’s portion of the Permian has also experienced tremendous production growth.
So what changed?
A major part of the answer lies in two technologies.
Traditional oil wells are relatively easy to visualize.
A drilling rig drills downward until the well reaches a hydrocarbon-bearing formation.
Horizontal drilling takes the concept much further.
Operators first drill vertically to the desired depth and then gradually steer the wellbore until it travels horizontally through the target formation.
Why does that matter?
Imagine an oil-bearing layer underground that is relatively thin but extends for miles horizontally. A vertical well may intersect only a limited section of that formation.
A horizontal well can travel through thousands of feet of the productive rock.
That dramatically increases the amount of reservoir contacted by a single well.
The technology itself isn’t brand new, but improvements in directional drilling, downhole measurement, geosteering, and related technologies made increasingly sophisticated horizontal wells commercially practical.
The results in the Permian have been dramatic.
EIA reported that average horizontal lateral lengths in the Permian increased from less than 4,000 feet in 2010 to more than 10,000 feet by the first nine months of 2022.
But drilling horizontally solves only part of the problem.
Operators still need hydrocarbons to flow economically from extremely tight rock into the well.
That’s where hydraulic fracturing enters the picture.
Hydraulic fracturing, commonly called fracking, involves pumping fluid and proppant into a formation under pressure to create small fractures in the surrounding rock.
Those fractures create pathways through which oil and natural gas can flow toward the wellbore.
Combined with horizontal drilling, hydraulic fracturing made it possible to economically develop formations that had previously been difficult or uneconomic to produce.
This combination helped unlock enormous quantities of so-called tight oil.
The Spraberry and Wolfcamp formations in the Texas portion of the Permian provide a good example.
These formations had been targeted with vertical wells for decades. But advances in horizontal drilling and hydraulic fracturing eventually made their lower-permeability intervals major development targets.
The result wasn’t merely another incremental improvement in drilling.
It fundamentally changed U.S. oil production.
For years, U.S. crude oil production appeared to be following a long-term downward trajectory.
Then the trend reversed.
Beginning around 2008, rapidly expanding shale and tight-oil development helped send domestic production upward again. EIA reports that onshore Lower 48 tight-oil production increased from approximately 800,000 barrels per day in 2010 to 8.9 million barrels per day in 2024.
The Permian accounted for approximately 65% of that tight-oil production growth.
Texas happened to sit on top of a substantial portion of the geological resources that were especially well suited to these technologies.
But geology alone still doesn’t explain Texas’ success.
One of the most interesting developments in today’s oil industry is that production doesn’t necessarily rise simply because companies deploy more drilling rigs.
Modern operators have become substantially more productive.
Advances include longer horizontal laterals, improved seismic imaging, more precise geosteering, sophisticated downhole sensors, improved drill bits, optimized hydraulic-fracturing designs, pad drilling, automation, and increasingly sophisticated analysis of geological and production data.
Together, these technologies allow operators to drill wells faster, place them more accurately within productive formations, and improve recovery.
The 2025 numbers illustrate the effect.
The number of active rigs per month in the Lower 48 actually declined 5% from 2024, and operators drilled 1% fewer wells. Yet U.S. crude oil production still increased to a record 13.6 million barrels per day as efficiency and well productivity continued to improve.
In other words, the industry’s technological story is increasingly about productivity rather than simply drilling more wells.
Geology and drilling technology get much of the attention, but Texas possesses another advantage that shouldn’t be overlooked.
Infrastructure.
More than a century of petroleum development has created an enormous ecosystem surrounding the Texas energy industry.
The state and surrounding Gulf Coast region provide access to pipelines, gathering systems, processing facilities, oilfield service companies, equipment suppliers, skilled energy professionals, refineries, storage facilities, petrochemical complexes, and export terminals.
That matters economically.
EIA has specifically noted the Permian’s advantages from relatively low operating costs, access to oilfield services, and proximity to Gulf Coast refineries and export infrastructure.
A giant resource is valuable.
A giant resource surrounded by the infrastructure and expertise necessary to develop and commercialize it is considerably more valuable.
Texas has both.
The story of how Texas became America’s largest oil-producing state is really the story of two different oil revolutions.
The first began with discoveries such as Spindletop and established Texas as a major petroleum-producing region.
The second came roughly a century later when horizontal drilling, hydraulic fracturing, advanced geological analysis, and increasingly efficient drilling techniques unlocked enormous quantities of oil from tight formations.
The scale of the transformation can be seen in Texas’ own production history.
EIA data show Texas produced approximately 399 million barrels of crude oil in 2009. By 2025, annual production exceeded 2.09 billion barrels.
That’s more than a fivefold increase in annual production in just 16 years.
So, what state produces the most oil in the United States?
Texas.
Its position at the top results from an unusually powerful combination of factors: world-class geology, more than a century of industry experience, the enormous Permian Basin, extensive energy infrastructure, and continued improvements in drilling and completion technology.
Those advantages have also helped the United States achieve something that would have seemed unlikely during the era of declining domestic production.
In 2025, the United States produced a record 13.6 million barrels of crude oil per day and remained the largest crude oil-producing country in the world. Texas’ production, combined with continued growth in the Permian Basin, played an important role in reaching that milestone.
For investors interested in the energy industry, understanding where America’s oil comes from, and the technology that makes modern production possible, provides important context when evaluating oil and gas opportunities.
At Aresco, we provide accredited investors with opportunities to participate directly in domestic oil and gas exploration and development. Investors interested in learning more can explore our guide on How to Invest in Oil and Gas for Tax Benefits & Passive Income and learn how direct participation programs can fit within a broader investment strategy.
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