Despite returning to healthy profits in the second quarter, major oil companies have scaled back spending to increase production.
ExxonMobil reported second-quarter profits of $4.7 billion after losing $1.1 billion during the same period in 2020; Chevron profited by $3.1 billion against a loss of $8.3 billion a year earlier.
French oil giant TotalEnergies [sic] notched profits of $3.5 billion and Royal Dutch Shell cleared $5.5 billion.
ExxonMobil’s share price has shot up 40 percent this year but remains around 4 percent below pre-crisis levels; Chevon’s stock has climbed 20 percent but also is a few percentage points shy of its mark in February 2020.
Oil prices fell below $30 briefly last year, but bounced back above $75 this summer; recently, the price slumped back to around $50 as Libya’s oil output reached its greatest since December 2014.
However, none of the majors are expanding their budgets for drilling and production in proportion to their profits, The Wall Street Journal reported.
Oil companies’ investors are pressuring them to curtail exploration and focus on pumping more oil and gas to generate cash. (See “BETTING ON OIL,” Trends Journal, 22 June 2021.)
ExxonMobil cut its capital budget to $19 billion this year from $25 billion before 2020’s crisis and recently said its outlay in 2021 will be closer to $16 billion.
The company will focus on pumping the most profitable oil, not just the largest quantity, CEO Darren Woods said in comments quoted by the WSJ.
Chevron has spent $5.3 billion through July this year on expanding its output, compared to $7.7 billion during the same stretch in 2020.
Chevron has said previously that it will increase production by no more than 3 percent annually through 2025 and will concentrate instead on returning money to its shareholders. 
Strong demand for plastics is keeping oil demand high and prices at premium levels in that sector, the WSJ noted, another factor that may create a global petroleum shortage. (See related story.)
TRENDPOST: 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.
TREND FORECAST: The oil majors are playing a risky game. They 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.
Oil companies will continuously tweak their 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 always, and as noted in this and other Trends Journals, military conflict in the Middle East remains an explosive wild card that can quickly spike oil prices. (See, “ISRAELI-LINKED TANKER ATTACKED BY DRONE: IRAN BLAMED” in this issue).

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