The Oil Companies Posting Record Profits While the Global Economy Slows – The Numbers Are Difficult to Justify

The way oil companies report their earnings has an almost theatrical quality. At seven in the morning, New York time, the press release is delivered. The cable business channels unveiled the same chart within an hour: a steep blue bar that towered over the modest cousin from the previous quarter. There are murmurs among analysts regarding “operational discipline” and “capital returns to shareholders.” A pumping jack in the vicinity of Hobbs, New Mexico, in west Texas, continues to nod against an orange sunrise, unconcerned with the words being spoken about it on TV.

It is becoming increasingly difficult to understand the numbers themselves. Together, Big Oil made about $222 billion in 2022—more than twice as much as the previous year. In just one quarter of that year, ExxonMobil alone reported nearly $18 billion. By 2026, the industry has returned to what insiders refer to as its “sweet spot,” which is between $90 and $100 per barrel, following a brief, bloody conflict in Iran that caused crude to swing between $70 and nearly $120. For the year, energy stocks have increased by about 25%. Due to tariffs and slower growth, the S&P 500 is losing money. The divergence is difficult to ignore.

A few weeks ago, a clip from the TV series Landman went viral, and industry insiders kept quietly acknowledging that it was spot-on. In his role as a Texas oilman, Billy Bob Thornton claims that although the company is still making money at $90, things start to get tight when gas prices drop to $3.50. That line has a true economic logic to it. Demand collapses if it is too high. Shale producers suffer if the level is too low. Instead of euphoria, the companies want stability. They experience euphoria that they did not request due to the current war-driven prices, and even that is accompanied by anxiety.

But what’s remarkable is how well Big Oil has isolated itself from the rest of the world economy. The cost of shipping containers is decreasing. PMI manufacturing in Europe continues to decline. In April, households in the United Kingdom continued to ration heating. Nevertheless, companies like Shell, BP, Chevron, TotalEnergies, and Equinor keep releasing balance sheets that appear to be largely unaffected by it. Their fortunes appear to be more dependent on whether the world is in some sort of trouble, ideally one that disrupts supply, than on how well the world is doing.

This place has a longer history that is simple to overlook. The oil industry has made about $3 billion in profit every day on average for the past 50 years. every day. That is not the result of innovative technology or astute management. Selling something that everyone needs at a price that hardly ever reflects its true cost—environmental, geopolitical, and human—is the structural reward. The equation might be altered by a carbon tax. Serious antitrust enforcement against producer cartels that covertly coordinate output is also a possibility. Right now, neither seems politically feasible. Both the amount of money in the system and the effectiveness of the lobbying it purchases are excessive.

Even those in the finance industry, who typically have no sentimental problems with successful businesses, are uncomfortable. When asked recently what he thought of Exxon’s most recent guidance, a Houston trader hesitated before responding. “It’s a great business,” he declared. “I just don’t always feel great about it.” That statement captures the essence of the entire situation. The figures are accurate. The wealth is genuine. The part that keeps eluding us is the justification. Furthermore, the gap between what is profitable and what is defensible is unlikely to close on its own as long as oil continues to be the easiest trillion-dollar bet on the table.