Why U.S. Oil Companies Are Not Plugging the World’s Energy Gap

If there are any winners from the war with Iran in the business world, they are Western oil companies that are reaping the rewards of much higher energy prices.

But don’t expect them to invest their bumper profits into pumping a lot more oil and natural gas — at least not yet.

In fact, there were fewer rigs drilling wells in the United States last week than there were when the war started on Feb. 28, according to the energy company Baker Hughes. Domestic oil production might even fall in 2026, the Energy Department said last month.

There are a few reasons companies are being so conservative. It takes many months to drill a new well and extract oil from it. As a result, companies base their decisions far more on what they think the price of crude will be in six months or a year than on today’s price.

Plus, Wall Street analysts and investors would generally prefer that oil companies stick to their budgets rather than chase higher production and risk losing money if the Strait of Hormuz reopens soon and oil prices fall.

“Do you want to be the dumb guy that sees oil at $100, raises your budget 25 percent and then watches oil plummet?” said Dan Pickering, chief investment officer for Pickering Energy Partners, a Houston financial services firm.

The answer so far from U.S. oil executives has been a resounding “no.” The two largest U.S. oil companies — Exxon Mobil and Chevron — reported first-quarter results on Friday and said they would not drill a lot more than they had planned to before the war.

“We feel like we are producing the maximum amount that we can,” Neil Hansen, Exxon’s chief financial officer, said of the company’s work in West Texas and New Mexico.

Before the war, Exxon expected to increase output in that region by about 13 percent this year. Its overall production plans have taken a hit because the company has a lot of assets in the Persian Gulf, where it typically operates through joint ventures with state-owned oil companies.

Chevron, which set out before the war to expand its production worldwide by up to 10 percent, struck a similar tone.

“We’re not adjusting our plan,” Eimear Bonner, Chevron’s chief financial officer, said in an interview. “It comes back to discipline.”

Exxon and Chevron are not alone in hesitating to change their drilling plans, according to a survey of oil and gas executives last month by the Federal Reserve Bank of Dallas. Most respondents thought U.S. oil production would be flat or rise this year by less than 250,000 barrels a day, or about 2 percent, because of the war in Iran — if it rose at all.

That would replace less than 3 percent of the 10 million barrels of oil or more that the world has lost each day the Strait of Hormuz has been closed. Iran and the United States are both restricting traffic in the shipping artery, which separates Iran from the Arabian Peninsula.

Even slightly higher U.S. production growth would be “nothing compared to the size of the issue,” Kaes Van’t Hof, chief executive of Diamondback Energy, said at a Columbia University energy conference in April.

“Compared to the global problem, that’s like putting a garden hose into an Olympic-size swimming pool that’s been emptied,” said Mr. Van’t Hof, whose company is based in Midland, Texas.

That said, the United States is drawing from stockpiles to export a lot more oil and other fuels than it normally does, according to data from S&P Global Energy Commodities at Sea. Exxon and Chevron said they were running many of their oil refineries at full tilt. And there are early signs that domestic drilling activity may pick up this year.

On Thursday, ConocoPhillips, another large U.S. oil producer, raised its spending plans for 2026 and said it would add a new drilling rig in the Permian Basin, a prolific oil field that straddles Texas and New Mexico.

Still, Conoco said it was likely to pump less overall in 2026 than it previously estimated, partly because of disruptions in Qatar, where the company has a stake in natural gas projects that have been affected by the war.

First-quarter profits fell at Exxon and Chevron, largely for accounting reasons that masked how much the companies will eventually benefit from higher oil prices.

Exxon’s earnings for the first three months of the year fell 46 percent from a year earlier, to $4.2 billion. Chevron’s first-quarter profit slipped 37 percent to $2.2 billion.

Not all oil companies reported similar results. London-based BP said its first-quarter profit soared thanks in part to its commodities trading arm.