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By Robert Cyran
NEW YORK, June 25 (Reuters Breakingviews) – Tales of grizzled wildcatters are captivating, but oil production boils down to an industrial process for spinning geology and capital into profit. Giants such as Exxon Mobil and Chevron are all about grinding out asset values in a mature industry. Just look at their actions when Iran presented a golden opportunity.
Shale wells are the child stars of the oil business. They peak fast and fade quickly. A typical well takes fewer than nine months to complete, but 80% of total output comes during the first two years of production. These features mean that when prices spike, a company can grab profit. West Texas Intermediate, an industry benchmark, traded for less than $60 a barrel early this year. Breakeven prices for a new Permian Basin well, the source of about half of U.S. crude, were about $67, according to a recent Federal Reserve Bank of Dallas questionnaire.
U.S. and Israeli attacks on Iran sent prices rising, but Big Oil didn’t react much. Chevron CEO Mike Wirth said in May that any windfall of surplus cash probably would head for the balance sheet before reaching shareholders. An Exxon Mobil executive said, “We’re not going to chase volumes even though prices are very, very high.” He added that the company hadn’t made an investment upstream, industry lingo for exploration and production, since 2019 at more than a $35 cost of supply. Smaller peers followed, and the number of operating oil rigs barely budged.
Anticipation that the military conflict would end soon muted the “drill, baby, drill” price signal. Rigs are also more productive. But the industry’s priority is careful expansion to maximize profit. The approach is unlikely to change. Over the past decade, the number of operators holding leases in the Permian Basin has dropped by some 75%, per energy analysis firm Enverus. Some might gamble, but bigger companies prioritize efficiency. More than 90% of oil from shale is left in the ground, leaving room for improvement. Meanwhile, untapped quality acreage is steadily declining. Finally, the market is past its youthful stage. Oil demand growth was already nearly flat, and this latest crisis helped propel the quest for fossil-fuel alternatives. The threat will only grow as electric-car usage spreads. A wave of shale bankruptcies a decade ago taught the hard lesson that raising output when there is insufficient demand is a recipe for vaporizing capital. It’s clearer now that wildcat tendencies have been tamed.
CONTEXT NEWS
The price of West Texas Intermediate, an oil industry benchmark, on June 25 was just under $71 a barrel for August delivery. It had been less than $60 at the start of 2026, but peaked at more than $112, following U.S. and Israeli attacks on Iran.
Editing by Jennifer Saba; Production by Maya Nandhini
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