By Collin Eaton

The oil giants that for years reined in fossil-fuel spending and showered investors in cash are warning the Iran war is severely tightening global oil supplies -- and they are in no hurry to change course.

The energy shock is manifesting in the U.S. Nationally, the average price of gasoline jumped 33 cents to $4.39 a gallon this week, one of the biggest jumps in the past 20 years and the highest price since the summer of 2022. Refiners and exporters are pulling oil at a rapid clip from U.S. stockpiles to feed global demand. And analysts are warning the supply crunch stemming from the blockage of the Strait of Hormuz will last months, if not a year or more -- longer than the closure of the Middle Eastern waterway itself.

Still, the Western world's biggest publicly traded oil companies -- Exxon Mobil, Chevron, Shell, ConocoPhillips and others -- signaled this week that they are sticking to prewar spending plans and effectively dismissing President Trump's call to boost oil-and-gas production. Markets, some executives said, are too volatile to make new investments and it is too early to say the world's long-term supply outlook has changed.

For now, the companies are reaping the benefits of higher oil prices, which have surged nearly 80% since the start of the year. Prices slipped Friday after Iran put forth a new peace proposal.

"The macro environment remains volatile and pretty impossible to predict, " Conoco CEO Ryan Lance told investors Thursday. "Amid such uncertainty, it's critical our priorities remain steadfast. They are clear, consistent, and they are durable."

Since 2022, when Russia's invasion of Ukraine sparked another war-induced energy crunch, Exxon, Chevron and Conoco have spent a combined $301 billion on dividends and share repurchases. Their capital expenditures over the same period came to $222 billion.

As the industry's focus has shifted from megaprojects to mega-buybacks, the companies' oil-and-gas production has grown only modestly. As such, the number of drilling rigs working in the Permian Basin of West Texas and New Mexico -- the largest U.S. oil field -- is virtually unchanged since the week before the Iran war began, according to analytics and consulting firm Enverus.

Jeff Miller, CEO of oil-field services company Halliburton, is among those who are more optimistic about the chance for an uptick in activity. Last month he said his company is fielding more inbound calls about equipment. Small private oil companies are expected to put more rigs on the map in the coming weeks and months, but they represent a small share of the Permian.

Despite suffering some temporary trading setbacks, Exxon and Chevron posted first-quarter earnings Friday that beat Wall Street's expectations. Exxon collected $13.8 billion in cash from operations, excluding accounting-related impacts, above its average for the past 12 quarters. The companies spent at least 45% more on dividends and share repurchases than they did on new investments.

Exxon CEO Darren Woods said on an investor call that the global oil market hasn't yet seen the full impact of the historically unprecedented disruption in oil-and-gas supplies. Oil tankers are still carrying cargoes to their destinations. Countries have released some strategic reserves and still have commercial inventories.

Even if the strait reopens soon, it will take at least one or two months for traffic to pick up, and crude buyers -- governments and industrial players -- will be racing to snap up supplies to refill inventories. That will continue to drive demand and lift energy prices, Woods said. Longer term, the resolution of the conflict with Iran -- and what assurances the world will get that flows will remain uninterrupted -- will determine whether prices are permanently higher.

"So whether or not a risk premium is put into the market, I think, is a question that has yet to be answered," he said. Exxon, he said, is boosting production in the U.S. and Guyana, but the company isn't deviating from previously set plans.

Despite not budging on their spending plans, the companies are running their refineries at full tilt to take advantage of soaring prices. Exxon's refining throughput rose by 200,000 barrels a day in March compared with the previous month -- an amount that is roughly equivalent to the production of an entire midsize refinery, Woods said. Chevron's U.S. refineries were pumping out fuel at a record rate.

Refiners Valero Energy and Phillips 66 posted strong earnings last month as they raised utilization rates and pumped more fuel. Valero set a monthly record for jet fuel production, while Phillips 66's refineries operated at 95% of their capacity.

Refineries and exporters pulled 6.2 million barrels from U.S. oil inventories last week to feed record U.S. exports. The size of the draw surprised analysts polled by The Wall Street Journal, who had expected inventories to decline by a mere 100,000 barrels.

Chevron CEO Mike Wirth warned fuel supplies are tightening across Asia, where the company's refineries are running at high rates and fuel is "dearly needed." In the U.S., the crisis is most severe in the company's former home state of California, he said.

"California is the state where the supply pinch is being felt first, and I would say most acutely, and it's flowed through all the way to the street," he said.

A gallon of regular gasoline averaged $6.06 in the Golden State on Friday, according to AAA.

Chevron has blamed California's regulations for a sharp decline in the state's oil production and the closure of dozens of refineries over the past 30 years. The company, which moved its headquarters to Houston in 2024, has been shipping crude to California from the Gulf Coast thanks to a waiver of the Jones Act, which requires companies to use U.S. vessels to ship products between ports.

Still, Wirth promised investors to remain disciplined on capital spending and on costs, "no matter what." In the Permian, for example, the company's top priority is collecting cash after flattening production last year at about 1 million barrels a day, he added.

"We could hit the gas and begin to grow again," Wirth said. "But I don't know what the future looks like."

Write to Collin Eaton at collin.eaton@wsj.com

(END) Dow Jones Newswires

May 01, 2026 17:13 ET (21:13 GMT)

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