Refinery Profits Shrink as Global Demand Reaches a Turning Point
The world’s five largest Western oil companies—ExxonMobil, Chevron, Shell, BP, and TotalEnergies—are extracting more oil than the market can absorb. This surplus is putting pressure on profits. Last year alone, these corporations earned $20 billion less than the previous year.
In response to shrinking margins, companies like the U.S.-based Chevron are implementing cost-cutting measures. On Wednesday evening, CEO Mike Wirth announced plans to reduce the company’s workforce by up to 20%, potentially affecting around 9,000 employees.
Despite the downturn, fossil fuel companies are still generating significantly more revenue than they did before the COVID-19 pandemic. During the lockdowns, demand for oil plummeted as transportation and industrial activity slowed. However, in the past two years, oil corporations saw record-breaking profits thanks to soaring oil and gas prices.
That era, however, appears to be ending. “For the last 150 years, oil demand has continued to rise, but that is now changing,” says Jim Burkhard, an oil market specialist at the U.S. analytics firm S&P Global, in an interview with Handelsblatt.
Following the pandemic, the industry had anticipated a rapid resurgence in oil demand. As a result, ExxonMobil, Chevron, and other major players ramped up production. However, the reality has fallen short of expectations. “Demand is lower than predicted, especially from China. And it’s not just Germany experiencing a sharp decline in economic growth—many other countries are facing similar challenges,” explains refinery expert Hagen Reiners from price analysis firm Argus Media.
With refinery utilization rates dropping and global economic uncertainty looming, the oil industry finds itself at a critical juncture.
