The energy sector is grappling with the effects of falling energy prices as global oil and gas markets stabilize. After a period of record-breaking profits driven by geopolitical instability, major companies like Shell and ExxonMobil are bracing for weaker financial results, marking a pivotal shift in the industry.
Falling Profits Amid Stabilizing Markets
Shell, Europe’s largest oil company, is expected to report adjusted profits of just over $24 billion in 2024, a sharp decline from $28.25 billion in 2023 and nearly $40 billion in 2022. The company has already warned investors about “significantly lower” trading profits in the final quarter of 2023.
Similarly, ExxonMobil, the largest oil producer in the United States, is grappling with weaker refining margins and broader financial pressures. After a record $56 billion profit in 2022, the company’s earnings have followed the downward trend, reflecting the industry’s struggle to adapt to stabilizing markets and lower prices.
Trump’s Pro-Oil Policies and Oversupply Risks
Complicating matters, former President Donald Trump’s push to increase oil and gas production has raised concerns about oversupply. Trump’s call for OPEC and U.S. producers to ramp up output aimed to lower global oil prices, weaken Russia’s economic footing, and provide relief to American consumers.
However, analysts warn that this strategy could harm the very companies that supported Trump’s presidency. Bjarne Schieldrop, a commodities expert at SEB, questioned the balance of Trump’s policies: “Is he siding with the U.S. consumer or the oil lobby?”
The results are already evident. U.S. natural gas prices, as measured by the Henry Hub benchmark, fell to an average of $2.33 per million British thermal units (MMBtu) in 2024, down from $2.57/MMBtu in 2023 and a steep 62% drop from 2022. Similarly, Brent crude prices dropped to $80.20 per barrel in 2024, continuing a decline from $82.60 in 2023 and over $100 in 2022.
A New Energy Normal and Industry Challenges
The current pricing environment reflects Europe’s successful adaptation to the loss of Russian energy supplies, relying instead on imports from the U.S. and the Middle East. This shift has stabilized markets but exposed the fossil fuel industry to the risks of oversupply.
The International Energy Agency (IEA) warns that a surge in new oil and LNG projects could outpace global demand, leading to sustained low prices for the remainder of the decade. This oversupply also runs counter to global climate goals, which require a significant reduction in fossil fuel production to limit global warming.
Implications for Shell, ExxonMobil, and the Energy Sector
For energy giants like Shell and ExxonMobil, the combination of falling prices, oversupply, and climate pressures presents a challenging new reality. Profit warnings from these companies signal an industry grappling with shifting geopolitical and economic dynamics.
While Trump’s policies may temporarily benefit consumers through lower prices, analysts caution that they risk undermining the long-term stability of the oil and gas sector. The fossil fuel industry, once dominated by profit-driven growth, is now at a crossroads, facing questions of sustainability, demand, and economic viability.