Following nearly three years of unprecedented profits fueled by Russia’s invasion of Ukraine, oil and gas giants Shell and ExxonMobil are preparing for significantly lower earnings as energy prices continue to drop.
Falling Profits for Major Oil Companies
Shell, Europe’s largest oil company, is expected to announce adjusted profits of just over $24 billion for 2024, a significant decrease from the $28.25 billion in 2023 and a record $40 billion in 2022. ExxonMobil, which posted a remarkable $56 billion in 2022, has also warned of weakening performance, particularly in its refining sector, which has been hit by lower margins.
Trump’s Oil Production Strategy Raises Concerns
Former President Donald Trump’s push to ramp up oil production could exacerbate challenges for fossil fuel companies. Trump has urged OPEC and U.S. producers to increase crude output, believing it would lower global prices and reduce Russia’s revenues, potentially weakening its war efforts in Ukraine.
However, analysts are concerned that this could lead to an oversupply of oil, further depressing already declining prices. While lower prices might benefit consumers, they pose significant risks to the profitability of oil companies.
Bjarne Schieldrop, a commodities analyst at SEB, remarked, “Trump’s push for lower oil prices raises questions about whether he supports US consumers or the oil lobby, which prefers higher prices to protect profits.”
Declining Gas and Oil Prices
Gas prices in the U.S. have sharply fallen, with the Henry Hub benchmark averaging $2.57 per million British thermal units (MMBtu) in 2023, a 62% drop from 2022. In 2024, the price fell further to $2.33/MMBtu. Similarly, Brent crude prices dropped from an average of $100 per barrel in 2022 to $80.20 in 2024, signaling a continued weakening of energy markets.
New Challenges Amid Energy Transition
The drop in energy prices signals a broader shift in the global energy landscape. With Europe adapting to the loss of Russian oil and gas by turning to imports from the U.S. and the Middle East, a “new energy normal” has emerged, characterized by greater stability but lower profits for fossil fuel companies.
The International Energy Agency (IEA) warns that an influx of new oil and LNG projects could lead to a long-term oversupply, keeping prices low throughout the decade. The IEA also stresses that expanding fossil fuel production is incompatible with global climate goals.
A Complex Future for Fossil Fuel Giants
As energy giants like Shell and ExxonMobil face declining profits, they must navigate an oversupplied market while responding to growing demands for renewable energy and climate-conscious policies. Trump’s pro-oil agenda may offer short-term benefits for consumers, but it risks undermining the long-term stability of the industry.
The once-profitable era, fueled by geopolitical shocks and high energy prices, seems to be fading. Fossil fuel companies must now confront an uncertain future marked by lower profits and increasing pressure to align with climate change goals.
