The Permian Basin Is Facing Its Biggest Threat Yet

The cowboy-booted wildcatters who figured out how to squeeze crude from shale rock are used to booms and busts, but this time it feels different. In the Permian Basin, a giant oil field beneath the dusty plains of West Texas and New Mexico that’s the source of roughly one-third of U.S. oil output, production is up 17% in the past year, compared with an increase of almost 40% in the preceding 12 months, according to the U.S. Energy Information Administration. Unlike the last slowdown, five years ago, it’s not oil prices that are mainly to blame. It’s investors.

Fed up with years of broken promises and make-believe forecasts, fund managers have dumped American oil and gas stocks this year, cutting off capital to investment-hungry shale producers and preventing private companies from coming to the market in initial public offerings. That this is happening in the Permian, the world’s largest and most productive shale basin, calls into question the longevity of America’s fracking revolution, which has turned it into the world’s top oil producer.