Big Oil Rethinks Strategy Amid Middle East Crisis

The Iran war has reshaped energy markets, forcing Big Oil to rethink its strategy for future growth. The five largest Western oil companies - BP, Chevron, Exxon Mobil, Shell, and TotalEnergies - are expected to report combined third-quarter profits of around $53 billion, a significant increase from the second quarter and more than double year-earlier levels.

The refining boom has driven these profits, with record refining margins reaching $63 per barrel. This represents a remarkable reversal for an industry that had previously viewed refiners as a low-priority business. However, companies remain unlikely to build new refineries in Europe or North America due to challenging economics.

Instead, they are investing in new capacity in Asia and Africa, particularly when linked to long-term supply and purchase agreements. The conflict has also exposed the need for buyers to diversify supplies, with consumers willing to pay a premium for reliable supplies. This strengthens the case for directing capital toward new producing regions such as the Atlantic Basin.

The industry is accelerating development of existing oil and gas assets while increasing exploration spending in countries such as Namibia, Brazil, Angola, and Venezuela. Competition for resources outside the Middle East is likely to intensify, with firms facing rising costs due to inflationary pressures.