View / Where will Big Oil go from here?

During the biggest disruption to energy markets in modern history, what’s a Hilton full of oil bosses to do? We’ll find out next week in Houston, in what industry guru Dan Yergin promised me will be a “very intense” CERAWeek conference. The world’s top oil and gas confab is usually pretty intense as it is — less walking than COP, more suits and ties, a nice little spread of afternoon treats in the press room, the occasional rodeo, and what amounts to several days of speed-dating with sources (although this year, I’ve heard from comms folks at a few big players that execs are too busy putting out fires to make time for the lowly press). But unlike most years, where multiple issues are at play, next week will be dominated by the war in the Middle East, and what it means for global energy. A few things will be top of mind for me:

• What was Trump prepared for? Administration officials have stressed that oil market disruption was anticipated in the Iran campaign, and ample backup plans laid that out. Richard Goldberg, a fellow at the Foundation for Defense of Democracies, who previously worked on energy issues in Trump’s National Security Council, told me this week that a lot of planning around oil contingencies took place prior to the bombing campaign against Iranian nuclear facilities last year, which “has put the administration in a position to act faster now than it otherwise would have.” Yet, the muted market reaction to the responses rolled out so far, the poor reaction by European allies to measures like rolling back sanctions on Russia, and the mass firing of career energy diplomats, suggest a more helter-skelter approach to dealing with an oil and gas crisis that could be much larger and longer-lasting than the White House anticipated.
• How is the oil and gas industry responding? This will be a bumper quarter for oil and gas shareholders, who have always learned to stick it out through the doldrums for spikey periods like this. But execs — some of whom will meet with Vice President JD Vance today — with a slightly longer perspective look at this moment and see mainly chaos, not profit. Ultimately, the crisis will translate to substantive changes in how oil producers and the myriad companies that serve them allocate capital, it’s just not yet clear how. Unless prices remain high “for months,” Rystad Energy analysts said in a note today, US shale is unlikely to drill more. But midstream — the unglamorous world of pipelines, storage tanks, and port facilities — could be a less obvious winner, as countries reprioritize maximum flexibility of supply chains.
• What does the conflict mean for the global energy transition? It’s clear that in principle, extreme fossil fuel market volatility is a powerful argument for nonfossil energy. Even today, the world economy is much less reliant on oil, in terms of barrels consumed per unit of GDP, than it was during the embargoes of the 1970s; if it wasn’t, the current situation would be far worse. I’m watching for signs of this principle in action: New deals, new technologies that suddenly look more attractive, new policies to accelerate investment, a new role for or attitude toward the Middle East in general.