Oil Industry In Trouble
This year was supposed to be the big year for big oil—“Drill, baby drill.” For several reasons, that has not worked out at all. Oil prices have fallen sharply, and tariffs have hit some of the equipment used for infrastructure.
The best barometer for the oil industry is industry giant Exxon Mobil. Its stock fell 11% last year, while the S&P 500 went up 8% over the same period.
Crude oil prices have dropped from $80 ten months ago to $60 recently. Semafor reports, “Meanwhile, as demand dries up, the global supply is increasing as OPEC countries raise their production quotas partly because of pressure from Trump to help keep gasoline prices low for American drivers.”
No More $80 Oil
Oil’s short term future is not its only challenge. Although some are slow to come online, the press for renewables means nuclear, wind, and solar capacity should grow sharply in the next five years. While crude will be necessary, it will be less essential.
AI server farms, air conditioning, and Bitcoin mining use fossil fuels, but virtually none are crude. That leaves transportation and petrochemicals as the primary customers. Transportation demands may begin to evaporate if EV adoption accelerates.
Unless there is a huge geopolitical based interruption like the one at the start of the Russian invasion of Ukraine, oil prices are not likely to rise. And was true then, the jump is not likely to last long.
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