Cheap oil continues to take its toll on American oil companies. Today brings news that Chevron and Exxon Mobil have posted their worst quarterly results of the current decade. The poor financial performance comes as no surprise, given that oil continues to hover around $50 per barrel – half of what it was a year ago.
Chevron and Exxon may be better positioned than their smaller rivals to weather the current slump, but they too are not immune from the effects of cheap oil. Following the dismal results, Chevron announced this morning that it will eliminate 6,000 to 7,000 jobs – roughly 10 percent of its workforce – and scale back its long-term production. And although Exxon actually posted higher-than-expected profits (due to improved margins on its processing operations), the result likely is cold comfort in light of the fact that Exxon has lost 11 percent of its market value this year and is on track for its worst annual performance since 2009.
Unfortunately for producers like Chevron and Exxon – and the numerous other industries whose fortunes rise and fall with the price of oil – prices are not predicted to increase in any material way in the near future. The current slump owes largely to a worldwide glut of crude, as production both domestic and abroad (particularly in the Persian Gulf states) stays strong. The recent nuclear deal with Iran may further exacerbate the situation by adding even more oil to the market in the near future.