A pumping jack is visible at sunrise on Feb. 24, 2025, in Hobbs, New Mexico. Julio Cortez/AP
Higher prices are good news for the oil industry — to a point. Crude was around $70 a barrel before the war in Iran. After U.S. and Israeli attacks, prices swung, spiking near $120; with a ceasefire they sit between $90 and $100. Some supply disruptions could take months to unwind, and some analysts predict a prolonged period of higher prices.
A clip from the TV show Landman went viral in which Billy Bob Thornton’s character, Texas oilman Tommy Norris, says the industry wants crude between about $60 and $90 a barrel. “Don’t get me wrong — we’re still printing money at $90,” he says, “But gas gets up over $3.50 a gallon, it starts to pinch.” Energy researcher Ed Crooks says that clip is exactly right: the industry prefers a sweet spot for prices, and the war pushed the market well outside it. The current crisis is therefore not just a cash bonanza; it’s also a worry.
A big boost to profits
Public companies’ upcoming quarterly reports will show how much producers are gaining. ExxonMobil told investors it estimates higher prices have boosted revenues by more than $2 billion. Energy stocks have outperformed the broader market this year, rising about 25% since January even after a dip when a ceasefire was announced.
The U.S., as the world’s largest oil producer, benefits disproportionately from higher prices: American output hasn’t been disrupted like Middle East exports, so U.S. producers can sell the same volumes at elevated prices. President Trump noted the country “makes a lot of money” when oil prices rise. A paper by economist Isabella Weber found the global oil industry earned about $916 billion in profits in 2022 after Russia’s invasion of Ukraine; U.S. firms captured roughly $301 billion of that. Weber says shareholder payouts concentrated those gains among the wealthy: about half of the industry’s profits went to the top 1% of Americans, while only 1% went to the bottom 50%.
While drivers and consumers pay more at the pump and in higher goods prices, the benefits concentrate among company owners and investors. That unequal distribution can be politically problematic because more people feel the pain of high fuel costs than benefit from the windfall.
Limits to the windfall
But the conflict hasn’t been all positive for producers. Companies with assets in the Middle East, or those whose oil and gas can’t reach markets because traffic through the Strait of Hormuz is reduced, have been directly hurt. ExxonMobil, for example, estimates that lower production and other disruptions are costing it $1 billion to $1.6 billion this quarter, offsetting much of its price-driven boost.
U.S.-only operators also face limits. Hedging — locking in prices months ahead — means many companies can’t fully capture sudden price jumps. Rystad analysis suggests oil-focused companies hedged about a third of this year’s production at an average floor of roughly $57 a barrel, capping how much of the current rally they benefit from.
Constraints on new drilling
Producers can’t instantly raise output to cash in. Drilling new wells takes time, and the number of partially completed wells that can be brought online quickly is low. In the Permian Basin, many wells produce oil and natural gas. Pipelines for gas are near capacity; producers wanting to drill for oil may be blocked by limited takeaway capacity for associated gas. Staffing shortages, geology, and other bottlenecks also limit ramp-up.
Investors add another check: they pressure companies to avoid repeating past mistakes of unprofitable, high-volume drilling. Over the first 15 years of the shale boom, many shale firms lost money drilling wells that produced disappointing returns. Today, investors demand confidence that new spending will pay off over the long term, which it may not if prices fall.
Volatility “is not good for anyone”
Volatility since the war has been extreme. Dustin Meyer of the American Petroleum Institute says such swings are bad for the industry because it relies on making long-term investments that are hard to plan with unstable prices. Volatility does benefit a small set: traders who can buy low and sell high, storage owners who charge to hold oil, some analysts, and lawyers. Most producers and the broader economy are harmed by erratic markets.
The downside of entrenched high prices
If prices stay consistently high — above $90/barrel, say — that can also hurt oil companies. Persistent high oil prices raise inflation, slow growth, and can prompt higher interest rates and job losses. A global slowdown or recession would reduce oil demand. High prices also accelerate interest in alternatives like electric vehicles and renewables; sustained high oil prices can produce “demand destruction,” a long-term drop in how much oil the world wants to buy. That outcome would weaken the oil industry’s prospects years into the future.
In short: moderate, stable prices are best for most oil companies. Sudden spikes can boost short-term profits but create uncertainty, physical and financial limits curb how much producers can immediately benefit, and prolonged very high prices can erode demand and harm the industry’s long-term health.