The post-pandemic demand surge and the Ukraine invasion initially led to huge profits for major oil and gas companies, but this boost has proven short-lived. Falling oil prices, increased market volatility, and growing investments in clean energy have exposed significant weaknesses in traditional strategies. To stay competitive, these established players must rethink their approach. Emerging companies, often backed by state investments, are leading the way with diversification and innovation, positioning themselves for future growth.
BP, for example, posted a record profit of $28 billion in 2022. However, its earnings dropped to $13.8 billion in 2023 and further fell to $8.9 billion in 2024. Its fourth-quarter 2024 results were especially weak, with a 61% decline compared to the same period the previous year, marking the lowest performance since 2020.
Despite scaling back its net-zero goals in an attempt to stabilize short-term earnings, BP’s reliance on returning to hydrocarbons for profit growth proved optimistic. This situation underscores the risks of sticking to outdated strategies and failing to invest adequately in diversification.
Chevron also faced similar difficulties. Its 2022 profit of $36.5 billion dropped by 40% to $21.3 billion in 2023. Despite declining profits, Chevron returned $26.3 billion to shareholders through dividends and stock buybacks. Unlike BP, Chevron has focused on volume growth, particularly in its Permian Basin operations, where output increased by 10% in 2023. While this has helped offset lower oil prices, Chevron’s model remains rooted in hydrocarbons with limited investment in low-carbon technologies, raising questions about its long-term competitiveness.
ExxonMobil, the largest U.S. oil company, posted a record $56 billion profit in 2022, but this fell to $36 billion in 2023, although still beating expectations. Exxon has been doubling down on oil and gas, acquiring Pioneer Natural Resources for $60 billion to strengthen its position in U.S. shale. It is also investing in carbon capture and lithium, signaling a hybrid approach that bets on both hydrocarbons and emerging energy markets. This strategy suggests that resilience in the future might rely on scale and adapting to new technologies.
However, the most notable shifts are happening outside the Western supermajors. The Abu Dhabi National Oil Company (ADNOC) has seen impressive growth, with drilling revenue up 41% to $1.2 billion and ADNOC Gas achieving a record quarterly net income of $1.4 billion. The company credits its resilience to diversification, with investments in LNG, petrochemicals, and digital transformation. A key move was ADNOC’s $16.3 billion acquisition of Covestro, a German chemicals company focused on sustainable products. This acquisition reflects ADNOC’s broader strategy of moving toward high-value, lower-carbon products.
ADNOC’s upcoming merger with Austria’s OMV is another step in its strategy to create a global petrochemical powerhouse worth $60 billion, further diversifying its portfolio and reducing exposure to volatile commodity prices.
Diversification, however, must be executed carefully. EDF, France’s largest utility, offers a cautionary tale. In 2022, it suffered a record $19.5 billion net loss due to safety issues that led to nuclear reactor shutdowns. Although it rebounded to a $12 billion profit in 2023 as more reactors came online, EDF faced setbacks with its offshore wind investments, demonstrating that clean energy can be risky if not managed properly.
The current energy market remains unpredictable. Oil prices surged to $133 per barrel in early 2022, but by the end of the year, they had fallen below $80. In 2024, OPEC-led production cuts kept supply constrained, but weak demand growth capped prices, highlighting the uncertainty in fossil fuel markets.
At the same time, global energy investment reached $2.8 trillion in 2023, with over $1.7 trillion directed toward renewable energy, electric vehicles, nuclear power, and grid modernization. For the first time, investments in renewable energy and electricity infrastructure surpassed those in fossil fuels. This shift is expected to continue, with projections showing that clean energy investments will nearly double those in coal, oil, and gas by 2024.
While hydrocarbons continue to deliver short-term profits, the trend is shifting. In 2023, the five largest energy companies returned over $113 billion to shareholders, emphasizing a focus on capital returns. However, as the energy sector undergoes a structural transformation, companies that rely solely on traditional approaches may find themselves outpaced by those willing to innovate and diversify.
To remain competitive, energy companies must be agile, reinvesting their profits into diversified platforms, emerging technologies, and cross-sector partnerships. The future will belong to those who adapt quickly to the changing landscape.
Related Topics:
- Oil Prices Drop Amid U.S. Tariffs, Emerging Markets Struggle
- U.S. Active Oil and Gas Rig Count Increases Despite Price Slide
- Kremlin Closely Monitors Oil Price Decline Amid Economic Concerns