U.S. Oil Giants Expect Record Profits With Hormuz Time Bomb

Key Point Summary – U.S. Oil Giants

• U.S. gas prices have jumped roughly 50 percent since the Iran war began.
• Germany has seen a milder rise of about 10 percent for gasoline.
• Chevron, Exxon Mobil and ConocoPhillips could benefit from higher oil prices.
• Analysts warn Brent crude could climb far above $100 if Hormuz stays blocked.
• U.S. Oil Giants may see record profits while drivers face higher costs.

U.S. Oil Giants Benefit From Global Shock

What frustrates drivers at the pump could turn into a jackpot for Big Oil. Since the start of the Iran war, U.S. gasoline prices have surged by roughly 50 percent. But while consumers pay more, oil companies could be entering a new profit boom. The biggest winners may be America’s “Big 3” oil companies: Chevron, Exxon Mobil and ConocoPhillips. These U.S. Oil Giants own huge production assets far away from the most dangerous parts of the Middle East.

Investor site Seeking Alpha now argues that the world may be heading into one of the biggest oil bull markets in modern history. The reason: the Strait of Hormuz remains blocked or severely disrupted, cutting off one of the world’s most important oil routes.

Hormuz Keeps Squeezing The Market

Before the war, roughly 20 million barrels of oil and gas shipments moved through the Strait of Hormuz each day. Now only limited traffic appears to be getting through. Saudi Arabia’s east-west pipeline to the Red Sea can move about 7 million barrels per day. But that still leaves a massive supply gap.

Global inventories have acted as a buffer. Yet that cushion is shrinking fast. Morgan Stanley estimates global oil stockpiles fell by about 4.8 million barrels per day between March 1 and April 25.

JPMorgan analyst Natasha Kaneva warned: “Inventories are acting as the shock absorber of the global oil system.” But she added: “Not every barrel can be drawn.” That means the oil market could soon face a brutal squeeze. If more reserves run low, prices could jump again.

Big Profits Could Be Coming

That is where the U.S. Oil Giants come in. Chevron, Exxon Mobil and ConocoPhillips have major assets outside the Middle East. They pump heavily in safer regions such as the Permian Basin in Texas, Guyana, Alaska and other global fields. As Middle East supply tightens, their barrels become more valuable.

Exxon Mobil has a market value of about $599 billion. Chevron is worth about $359 billion. ConocoPhillips stands near $139 billion. Their CEOs are already among America’s best-paid energy bosses. Exxon CEO Darren Woods earned about $33 million in total compensation. Chevron CEO Mike Wirth earned about $32.7 million. ConocoPhillips CEO Ryan Lance earned about $23.1 million. This year, the windfall could grow even larger if oil keeps climbing.

Oil Shock Could Slam The Economy

The profit story has a dark side. Some analysts warn that deeper shortages could push oil far above $100 a barrel and damage the global economy. Seeking Alpha analyst Michael Fitzsimmons sees an even bigger surge. He argues Brent could reach $150 per barrel. He also sees a better than 50/50 chance that Brent could hit $200 before the crisis end.

For drivers, that would mean more pain at the pump. For consumers, it could mean higher prices across the economy. But for U.S. Oil Giants, the Iran war could become a historic profit machine.