Chaos in Energy Markets Boosts Big Oil Earnings

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Alex Ossola (0:33)

A chaotic quarter for energy markets helped US oil companies log eye-popping earnings.

Collin Eaton (0:39)

Where the crisis has moved now is in fuel. So we're talking about the big three fuels, jet fuel, diesel, and gasoline.

Alex Ossola (0:48)

Plus California filed a lawsuit to block the Paramount Warner Brothers merger. Gavin Newsom is concerned about it. And why perfectly edible lettuce is rotting in the fields? It's Friday, July 31st. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

We kick off tonight's show in New York, where the state's attorney general has filed a lawsuit against prediction market Cal-Shee. The suit says that the company runs an illegal gambling operation, and the attorney general's office is asking the court to ban Cal-Shee in New York. If the case succeeds, Cal-Shee might have to pay as much as $36 billion in penalties and repayments. Cal-Shee and other prediction markets argue that states have no right to regulate them, since their markets are more akin to Wall Street trading overseen by federal regulators. A Cal-Shee spokeswoman called the New York suit quote, political theater.

And OpenAI said today that it has more than a billion active users and two million businesses using its artificial intelligence models. OpenAI has been cutting prices for some of its models, part of an effort to get more users and help it keep up with its big rival, Anthropic.

America's largest oil companies reported a blockbuster quarter after the oil disruption caused by the Iran War sent energy prices soaring. ExxonMobil's earnings for the quarter rose to $14.5 billion, more than double from a year earlier and their highest level since 2022 And Chevron reported $12.1 billion, its highest quarterly earnings on record. But how exactly did these oil companies reach these milestones? And do they expect the good times to last? Collin Eaton covers US oil companies for The Journal and joins us from Texas. Collin, Exxon CEO Darren Woods said on the company's earnings call today that outside the Middle East, oil and gas production has grown a lot this year.

SPEAKER_4 (2:49)

In the upstream, excluding the Middle East, we delivered our highest production volumes in more than two decades.

Alex Ossola (2:56)

Collin, how and where were they able to increase production?

Collin Eaton (2:59)

Where Exxon's boosting its production is primarily in the Permian Basin here in Texas. A few years ago, they bought this smaller company, really big in West Texas, called Pioneer Natural Resources, and that's given them this huge runway to keep drilling these really giant wells. These are four-mile horizontal laterals, that's about 70 football fields, and they've been doing all kinds of experiments with new technologies out there, so that's where they are boosting output.

Alex Ossola (3:31)

The production part of it makes sense, given the disruptions we've seen in the Strait of Hormuz, but was that the major reason that they saw such huge gains? Is it because of the oil prices that were falling this past quarter?

Collin Eaton (3:43)

So the disruption initially caused a spike in oil prices, but those prices have come down, and that's because we're not using as much oil around the world. Where the crisis has moved now is in fuel. We're talking about the big three fuels, jet fuel, diesel, and gasoline. So what's happened is because there's less oil coming out of the Middle East, China cut the amount of oil that is turning into fuel.

They cut the amount of fuel that they're exporting. Russia did the same. So there's just a lot less product on the market. So those prices are under a lot of pressure. Basically for Exxon and for Chevron, what that means is the refining margins on making those fuels, they're essentially at record levels. So it's never been more profitable to make those fuels. They're pumping out as much as they can, and yet we're still draining inventories of oil and fuels.

Alex Ossola (4:43)

I want to shift to talk about Venezuela a little bit. Chevron is the only active US oil producer in the country, and the company has boosted oil production 15% over the past six months to about 280,000 barrels a day there. But that's not really living up to what the Trump administration was pushing a lot of these oil majors to do earlier this year, to start or restart operations in the country.