Big Oil Prepares for Lower Prices as Downturn Looms

Big Oil companies like Shell, BP, and Exxon are quietly preparing for lower oil prices. They're allocating dollars in ways that suggest they expect a downturn in the industry. This approach is wise: oil is a cyclical business, and lower prices are always around the corner.

The current price of West Texas Intermediate crude is about $75 a barrel, down 35% from its conflict peak. The Iran war has been ongoing for over 150 days, and while triple-digit oil prices are still a risk, some forecasters predict that prices could drop to $50 a barrel for a short period in 2027 or 2028.

It's not just the forecasters who think this way. The big oil companies themselves seem to be preparing for the worst. Their dollar allocation suggests they're bracing for leaner times, and it's the right approach given the cyclical nature of the industry.