Oilmen need lots of water for hydraulic fracturing, also known as fracking, so oil and natural gas can be brought up from deep underground, reports CNN Money. The practice uses between 2 million and 12 million gallons of water per well.
With drought affecting about 60 percent of the country, that water is becoming more expensive. Farmers who used to sell their water for 35 cents a barrel are now turning off the spigot, even with bids of more than 75 cents.
So oil companies are cutting back on the number of planned wells. Chris Faulkner, chief executive officer of Breitling Oil and Gas, said between 10 percent and 12 percent of their planned fracking wells have been shelved.
Oil industry analyst Neal Dingmann said he expects the number of new wells to drop by 5 percent.
The impact of the slowdown is not expected to be significant because shale oil represents just a fraction of total U.S. production.
However, it's a different story for natural gas. Prices have risen 70 percent in the last few months.