Fossil Fuel Execs Had a Fabulously Wealthy Year—and They’re Mad About It

The days leading up to the end of the year are, for many, a time for reflection: to look back on the last year and ahead to the next. That’s no different for fossil fuel executives. A new report provides some insight into their New Year’s resolutions for 2024: Expand production and buy more stuff.

Each quarter, the Federal Reserve Bank of Dallas surveys oil and gas executives about the state of their industry. It polls the heads of small and large exploration and production companies as well as oil field services firms. (These generally don’t produce fossil fuels themselves but do things like manufacture, maintain, and repair drilling equipment; survey land; and haul fluids used in extractive processes.) Respondents are asked to report their activities and expectations for benchmark oil prices like West Texas Intermediate, a key factor in firm-level investment decisions. “Special questions,” which change every quarter, ask about more recent happenings in the industry, and participants are allowed to anonymously comment on all of the above. Rather than the kind of hard data you might get from something like a rig count, these surveys are a kind of vibe check on the fossil fuel industry’s top brass. Every year, they seem to be cranky.

By the numbers, things are looking up for the industry. The United States is producing record amounts of crude oil—more than any other country ever has. Forty-three percent of executives surveyed hope to increase capital spending “slightly” or “significantly” over the next year, while 26 percent say they’ll keep spending roughly the same. Thirty-one percent expect to decrease capital spending.

Specific plans vary depending on the size of companies. Forty-one percent of smaller firms listed “grow production” as their primary goal for 2024; 25 percent said they hope to maintain production, the next most popular choice among several responses. Larger firms—including so-called “integrated” producers, who handle more parts of the productive process in-house—said they plan to focus on buying up assets, continuing on a wave of consolidations that’s included ExxonMobil’s $60 billion all-stock acquisition of shale giant Pioneer Natural Resources and Chevron’s $53 billion buyout of Hess. While fossil fuel executives differ on some things, they overwhelmingly agree that these types of deals will continue to happen: 77 percent of those surveyed expect to see more deals worth more than $50 billion happen over the next two years.

For oil field services companies—big names include Halliburton and Schlumberger—this consolidation trend is worrying, as some of their main clients are the kinds of smaller and mid-sized companies that bring them in to provide equipment and services bigger companies handle themselves. “The further consolidation of [exploration and production] companies looms large for service and/or equipment providers. I see it as a negative for the industry and the communities in the Permian Basin,” wrote one survey respondent. Another was more blunt: “The acquisitions occurring in the oilfield are not helpful.” Their colleague called for federal intervention: “The Federal Trade Commission should adopt a policy that would stop the wholesale purchases of these large companies as it is detrimental to the energy health of the nation and economic stability to our communities.” (Major acquisitions are subject to approval by the FTC, which is investigating both Chevron and Exxon’s recent acquisition plans as potentially anti-competitive.)

Acquisitions go up or down in this industry depending on several factors. Companies that made record profits in 2022 have more cash to throw around. Many also expect oil prices to stay relatively low for the foreseeable future. In that context, big companies—oil “majors” like ExxonMobil or Chevron—have a lot to gain from buying up more production capacity so that they can operate more efficiently than smaller competitors, by reducing the amount spent to make every barrel. One respondent warned those companies are making bets on a future that won’t happen, nodding toward feared declines in shale production:

Majors are explicitly investing on the thesis that the back end of the forward curve for oil is just plain wrong. Whatever Excel model they are using to justify these prices isn’t going to align with their consolidate-and-cut operations. Inventory for U.S. onshore will be extremely valuable in five years as shale inches toward death and moves to terminal decline. Prices are likely closer to $150 than $50 at the end of the decade. The young folks in energy need to learn offshore and international exploration quickly. [My emphasis added.]

Companies’ climate and sustainability goals also tend to depend on their size. While 53 percent of the large firms reported that they plan to reduce carbon emissions, just 18 percent of small firms intend to do the same. Similarly, 68 percent of bigger drillers plan on reducing methane emissions, compared to 34 percent of smaller ones. Fifty-one percent of those smaller companies intend to undertake none of the sustainability measures the Dallas Federal Reserve asked about, in contrast to the 11 percent of respondents from large firms. Very few companies in either category—just 6 percent of drillers—plan to invest in renewables.

Under the shield of anonymity, most concerns executives voiced had little to do with the alleged “woke liberal” war on oil that Republicans keep banging on about. Mounting supply chain costs are a major concern, as is the Organization of Petroleum Exporting Countries’ ability to keep prices elevated—a key priority for an industry that needs higher prices to break even on unconventional extraction methods like fracking.

That’s not to say executives didn’t complain about the White House and regulations. One respondent accused the administration of executing a “war on the petroleum industry,” even though the Biden administration has overseen record profits and production. In October, to note, the White House announced a substantial subsidy via the Strategic Petroleum Reserve. Its promise to buy up oil when prices are below a certain level is meant explicitly to “address producer concerns about uncertain demand in future years, encouraging immediate investment.” Unmoved, another executive complained about how the industry has become “political football,” arguing that “it’s not like the old days when people simply griped about the price of gasoline. They are now calling for the complete elimination of one of the most critical components of our economy.”

Even record profits can’t please some people, apparently. With production predicted to break new records in 2024, next year stands to be a good one for the U.S. oil and gas industry, whether executives can admit it or not.