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Rising oil prices driven by the Middle East conflict are increasing profits for U.S. oil producers, but uncertainty over how long the price surge will last is making companies cautious about expanding production.
But will that money go towards increasing U.S. oil production?
When oil prices move higher, it’s often a signal to drill, baby, drill. But this case is different, according to Dan Pickering, chief investment officer at Pickering Energy Partners.“
This is a most likely a transitory event, with the war in Iran, and prices [are] likely to come back down,” he said.
California diesel prices average $7.91 a gallon, with several stations charging over $9 and some pump displays hitting their $9.999 limit, GasBuddy reports.
Analysts warn the escalating Iran war could deepen global fuel shortages, push diesel prices higher and intensify inflation as energy supplies dwindle.
Chevron and SLB have signed major Venezuela oil deals, but political uncertainty and financial risks are keeping smaller Houston firms on the sidelines.
The oil outlook has shifted from potential surplus to sustained tightness—and Dan Pickering does not expect a quick return to the market that existed before the fighting in Iran began earlier this year.
Oil and gas companies are expected to report enormous profit growth as the war in Iran drives energy prices higher, but their stocks continue to underperform because investors question whether those gains will last. Political sensitivity and uncertainty around oil prices may also make companies reluctant to immediately increase dividends or stock buybacks.
President Trump initially celebrated rising oil prices because they boosted U.S. energy profits. However, after the Iran war pushed crude prices from roughly $66 to an average of $95 per barrel between March and June, oil companies and their allies are now poised to receive major financial gains. The situation has become politically inconvenient for Trump, who is no longer pleased with the consequences of the price surge.
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