Big Oil will be back in the hot seat this week, as companies post what are expected to be bumper second-quarter profits driven by the war in Iran.
What’s good for consumers is bad for oil investors: Share prices for Chevron and ExxonMobil ticked down over the past couple of days in tandem with a modest fall in oil prices. Still, both companies’ stock is up nearly 40% in the past year, as they ride the swell of an unprecedented energy crisis. Their European peers are doing very well too, thanks especially to their busy trading desks. And more good news for their shareholders is likely coming soon.
When Exxon reported a dip in profits during the first quarter, CEO Darren Woods explained that two forces were at work to counteract the apparent benefits of higher crude prices. One was disruption to the company’s Middle East operations, which cut into production. The other was the hedging contracts the company and its peers routinely use to protect themselves from market volatility, which means that during price spikes, the company will initially — somewhat counterintuitively — book losses.
But later, once energy companies actually collect payment for delivered barrels, the real profits roll in. That’s what we should expect to see later this week: Globally, oil producers as a group are on track to pocket a half-trillion-dollar cash windfall this year, Wood Mackenzie analysts said on Tuesday, double the pre-war estimate. The other thing to watch is what the companies say they plan to do with all that cash: So far most have chosen to sit on it, rather than dole it out to shareholders or invest in new drilling.
No one likes a war profiteer. It’s a safe bet this week’s earnings reports will reinvigorate outrage from US President Donald Trump, members of Congress, and their peers in Europe. Power utilities, which will also likely report higher profits driven by the AI data center boom, will be in for the same tongue-lashing. But I don’t see any real punishment coming their way. For energy CEOs, the bigger risk is blowing this unexpected piggy bank on projects that won’t pay off if the situation in Iran calms down soon.