On 28 April, ExxonMobil posted its highest quarterly net income ever, reaching $11.4 billion after new U.S. and coastal South American wells produced more robustly than had been expected.
Chevron’s profit edged up to $6.6 billion on the strength of higher demand for refined products.
Major oil companies are profiting at the same levels they did when Brent crude’s price peaked at $147.50 in July 2008, even though the current price now hovers at close to half that amount.
ExxonMobil has earned more than $10 billion in each of the last four quarters. Chevron was close behind with an average near $9 billion. Neither company has achieved that level of profitability since 2008.
The booming profits are “all about us increasing our production volumes significantly,” Kathy Mikells, ExxonMobil’s chief financial officer, said in a Bloomberg interview.
Oil flows in the U.S. Permian Basin in Texas and New Mexico and off the coast of Guyana together shot up 40 percent, year on year, she noted.
Chevron’s global refining operations brought in $1.8 billion during the quarter, five times more than in 2022’s first quarter.
The companies have engaged in ruthless cost-cutting following oil’s price plunge in late 2014 and continued after Brent’s futures price fell briefly into negative numbers in April 2020 when the COVID War began.
Also, oil majors have declined to expand their budgets for new drilling and exploration even as the COVID era waned. They have hoarded cash to buy back their shares and lavish larger dividends on shareholders, as we detailed in “Oil Majors Withhold Investment in New Production” (3 Aug 2021) and “Oil Majors Use Cash to Buy Back Stock, Increase Dividends” (10 May 2022).
TREND FORECAST: As we have noted in the articles cited above, oil companies see a diminished future for their products as fuels. Restraining production boosts prices and profits will give the companies maximum gain from a market that will diminish over time.
The companies need to restrain production to keep prices high, share prices up, and investors interested.
However, the more scarce and expensive oil is, the more consumers will feel pressed to turn to renewable energies. But currently, there are not many to turn to.
Oil companies will continuously tweak their prices and production to find the sweet spot where revenues stay up as long as possible without unduly speeding the global transition to a fossil-fuel-free future.
As noted in previous Trends Journals, military conflict in the Middle East remains an explosive wild card that can quickly spike oil prices, as can major unexpected changes in the Ukraine conflict.