US oil is back, and ExxonMobil’s $60 billion deal isn’t even the biggest signal
Workers connect drill bits and drill collars used to extract oil in the Permian basin outside of Midland, Texas.
Brittany Sowacke | Bloomberg | Getty Images
After three and a half years, a tripling in the S&P 500 Energy Index, and many soon-to-be-forgotten culture-war volleys, the U.S. Department of Energy announced Oct. 12 that U.S. crude oil production had hit an all-time high of 13.2 million barrels per day, entirely wiping out Covid-era losses of more than 3 million barrels per day.
The news came a day after a $60 billion deal between Exxon Mobil and independent oil producer Pioneer Natural Resources. The combination of recovering production, sustained pressure from Wall Street for cost containment and high stock dividends, and consolidation like the Exxon-Pioneer hookup is not a coincidence.
The energy sector’s big stock move in 2021 and 2022 was mostly a recovery from a disastrous decade for Big Oil, when tens of billions of cash flow were lost on unprofitable fracking wells, and of a consolidation that was good for company profits, dividends and shareholder returns.
The foundation of the 2010s oil business was cracking when Covid broke it, said Rob Thummel, senior portfolio manager at Tortoise Ecofin in Kansas City, Mo. Monthly production topped out at 13 million barrels per day in November 2019 and hit 9.9 million by February 2021.
“Capital discipline in the U.S. industry hasn’t gone away, and oil is at $85 to $90 a barrel,” he said.
So, what brought Big Oil back, and what’s next?
Here are seven important factors that played into U.S. oil’s recent history and will influence its future.
Why the shale drilling bust ended
Oil broke gradually and then suddenly. The S&P 500 Energy Index lost 40% of its value between 2014 and 2019. But the pandemic drove the fast part of the bust, in part by leading Wall Street to insist on further cuts in capital spending, Thummel said.
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What brought it back was renewed demand and higher prices.
Recessions end, and oil demand has slowly rebounded after the 2020 downturn and lingering supply-chain shock. And rising prices for WTI crude – which careened during Covid to less than $15 a barrel, shot back to $120 in 2022, and is now near $90 – can make previously-unprofitable plays work, he said.
The U.S. production rebound is more concentrated
Big Oil isn’t back all over America: Production is still down sharply in Oklahoma and North Dakota. It hasn’t changed much in Alaska, where production is in a long-term tailspin. And offshore oil drilling in the Gulf of Mexico recovered to 2 million barrels a day, but hasn’t grown.
Instead, the surge is concentrated in the Permian Basin region of Texas and New Mexico, where production costs are among the lowest in the country, said Alexandre Ramos-Peon, head of shale well research at Rystad Energy. Oil from the Permian Basin costs an average of $42 a barrel to produce, he said, with North Dakota in the high $50s to $60.
North Dakota is also hampered by weaker access to pipelines than the Permian Basin, where many producers can use pipelines that lie entirely within Texas, skirting federal regulation of interstate pipelines. That’s only one example of a relaxed regulatory environment in Texas, compared to places like climate-conscious Colorado, the nation’s No. 4 oil producer, where output is still down 3 million barrels per month, said Jay Hatfield, CEO of Infrastructure Capital Advisors in New York.
“There’s this place called Texas that doesn’t really know what energy regulation is,” he said.
Where oil companies have been spending their money
U.S. oil companies cut capital spending to $106.6 billion last year from $199.7 billion in 2014, according to Statista, contributing to the decline in oil production and arguably delaying the recovery. And they put that money to work paying higher dividends and doing stock buybacks, Thummel said.
According to Energy Department data, oil and gas companies paid out about $75 billion per quarter in the last year. The share of oil-company operating cash flow going to shareholders rose to half of operating cash flow from about 20% in 2019, the department says.
The link between Exxon-Pioneer deal and peak barrels
Offsetting the decline in capital spending is higher productivity per well — while all of the U.S. oil production is back, the closely watched Baker-Hughes rig count is barely half of 2018 levels. The average production per rig of new wells just topped 1,000 barrels a day, up from 668 four years ago, according to the Energy Department. So the industry didn’t have to add a ton of new wells or drill in as many new places to recover fully.
On CNBC last week, ExxonMobil CEO Darren Woods said the company did the merger because it thinks its technology and scale can raise the productivity of Pioneer’s fields.
“Their [Pioneer’s] capabilities, bringing in their Tier 1 acreage, our technology, our development approach, frankly, brings higher recovery at lower cost,” Woods said.
That suggests more mergers to come as rivals like Chevron also make plays to boost their presence in U.S. shale, especially in the Permian Basin, Hatfield said. Chevron already has made several shale-related acquisitions in recent years, including $7.6 billion for PDC Energy this year and $5 billion for Noble Energy in 2020. Independent producers are under more pressure than more-stable super-majors to pay very high dividends to justify the risk of oil-price fluctuations, which will mean tighter constraints on their ability to keep up in technology and scaling of operations, he said.
U.S. crude, energy security and Big Oil economics
As a result of the rebound in crude, is American repatriating its oil? A little, says Hatfield. Permian shale right now is much cheaper to produce than offshore oil, comes with much less political risk than offshore drilling in much of the developing world, and takes much less time to make a profit than offshore wells. That’s leading companies like Exxon to bet more heavily on Permian shale than offshore drilling, he said.
“The super-majors are taking capital out of offshore,” Hatfield said. “They are reducing overseas development because it is more risky.”
The biggest part of the equation is that time equals risk, Ramos-Peon said. Global oil producers aren’t squeamish about investing in parts of the world where governments change, but the years-long investment cycles in offshore drilling make the much shorter turnarounds in Texas appealing to companies like ExxonMobil, which is one of the industry’s biggest offshore players.
“In the Permian, you get your capital back in a little over a year,” Hatfield said. “The return on investment is much faster and much higher because the wells begin to produce so quickly.”
What oil’s recent trading and Israel-Hamas mean for gas prices
Gas prices tend to move in tandem with the price of crude oil, which has dropped to about $88 per barrel from $94 in September, driving a 20-cent per gallon drop in the nationwide average price for regular. But the influence of OPEC, whose coordinated production cuts in June have driven prices up 35 cents, often offsets what domestic producers do, Ramos-Peon said. And right now there is the added uncertainty of whether the Israel-Hamas war will result in a slash in production from Iran, whose government supports the Hamas rebels who launched bloody attacks into Israel, he said.
“I believe crude prices will stay around the current level in the short term, and in the long term should trend down,” he said. “If there are sanctions against Iran, that will be bad for consumers.”
Short-term shale plays, oil consumption and climate change
What’s good for oil companies in the short-term doesn’t change the longer-term trajectory of the oil market or carbon reduction.
Meeting climate goals has more to do with long-term shifts in energy use than with short-term production targets, Ramos-Peon said. Rystad expects U.S. production to rise to 13.6 million barrels per day next year and 13.9 million in 2025, he said. After that, forecasts get more difficult because so much can change, but by late this decade oil consumption should peak before beginning to ebb, he said.
Even as more cars go electric, demand from older cars and uses of oil in chemicals will keep the oil business very large, Ramos-Peon said. And the risk that the business will erode will make drillers focus on shale more than offshore drilling, Hatfield said
“In the context of not knowing for sure, why wouldn’t you want a return on your investment in three years rather than 30?” he said.
Short-term, the biggest threat to the rosy scenario is that oil-industry cash flows are falling sharply from a peak last year. The Energy Department says its survey of 139 producers, foreign and domestic, shows a 36% drop in second-quarter operating cash flows from 2022. Profits are narrowing for the first time in two years, the department said.
Then again, the price of crude has risen $16 a barrel since the end of the second quarter. And in the oil business, price rules everything.
Environment
Kia’s first electric hatchback is here and it has nearly 400 miles range: Meet the EV4 hatch
Who said hatchbacks are going out of style? Kia’s first electric hatchback, the EV4, went on sale in the UK on Monday, offering the longest driving range of any of its EVs to date. Here’s a full breakdown of prices and specs.
Meet the EV4, Kia’s first electric hatchback
After launching the sedan version in Korea in April, the EV4 already took the top spot as the best-selling domestic electric sedan in its second month on the market. It’s already being called a “box office hit.” Now, the new hatch variant is officially on sale.
Kia opened orders for the EV4 hatchback in the UK on Monday, starting from £34,695 ($47,700). The EV4 is Kia’s first crack at an electric hatchback.
With an impressive 388 miles of WLTP driving range, it’s also the longest driving range of any EV Kia has ever produced.
The hatch is based on the same E-GMP platform as the EV4 sedan and Kia’s other electric vehicles, but it’s custom-tailored for European buyers.
The base EV4 “Air” is available with two battery packs: 58.2 kWh or 81.4 kWh, providing a WLTP driving range of up to 273 miles or 388 miles on a full charge. Kia said it’s the brand’s first electric vehicle offering a range of over 380 miles.
The sporty “GT-Line” and top-spec “GT-Line S” variants are available exclusively with the extended range (81.4 kWh) battery, which offers a range of 362 miles.
All EV4 hatchback models are powered by a single front motor with 201 bhp (150 kW) and 283 Nm of torque, good for a 0 to 62 mph sprint in 7.5 secs.
The interior features a similar setup to Kia’s latest EV models, like the EV3 and EV9, with its new connected car Navigation Cockpit (ccNC) at the center. The setup features dual 12.3″ driver clusters and infotainment screens in a curved panoramic display. An additional 5.3″ touchscreen for climate control is included for easy access to heating and ventilation functions.
Like the EV3, Kia’s electric hatchback will include an AI Assistant, powered by ChatGPT. It will also be the brand’s first vehicle with several entertainment settings, including “Rest mode” and Theatre mode.”
With all the seats upright, the electric hatch has a boot space of 435 liters, which Kia claims makes it “one of the most practical vehicles in its segment.”
With a length of 4,430 mm, a width of 1,860 mm, and a height of 1,485 mm, the EV4 hatchback is about the size of Kia’s XCreed.
The EV4 hatch can recharge from 10% to 80% in 29 minutes, while the larger battery will take approximately 31 minutes to charge using a 350 kW DC fast charger.
| Kia EV4 hatchback trim | Starting Price | Driving Range (WLTP) |
| Air Standard Range | £34,695 ($47,700) | 273 miles |
| Air Long Range | £37,695 ($51,700) | 388 miles |
| GT-Line | £39,395 ($54,000) | 362 miles |
| GT-Line S | £43,895 ($60,200) | 362 miles |
Kia opened orders for the new electric hatch on Monday, July 1. It will join the EV3, EV6, and EV9 in the brand’s European lineup. The EV4 hatchback will be built at Kia’s plant in Slovakia to expedite deliveries, which are scheduled to begin in the Fall.
Kia also announced on Monday that a new EV4 Fastback variant will join the lineup, but didn’t offer any additional details. More info, including prices and specs, “will be revealed in due course.” Check back soon for the latest.
What do you think of Kia’s first electric hatchback? Would you buy one in the US? Unfortunately, it’s not likely to make the trip overseas, but we will see the sedan version launch at some point in early 2026. Let us know your thoughts in the comments.
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Tesla (TSLA) is about to release its Q2 2025 delivery and production results. Here, we examine what Wall Street expects and what would make sense in reality.
Wall Street has struggled to understand Tesla’s decline in deliveries over the past year.
The analyst consensus for the first quarter was over 450,000 deliveries in January, but that number dropped to 377,000 deliveries by the end of the quarter.
They had to adjust down by 73,000 units, or about $3 billion in sales, over just two months, and they still got it wrong by more than 40,000 units.
Something similar is happening this quarter.
The Wall Street consensus was for 444,000 deliveries in April, indicating that analysts believed Tesla when it stated that the poor performance in the first quarter was solely due to the Model Y changeover and that it could return to growth or maintain demand, as it had delivered approximately 444,000 vehicles in Q2 2024.
However, that consensus waned throughout the quarter as data confirmed that Tesla is not production-constrained, yet still faces significant demand issues.
The Wall Street consensus for Tesla’s Q2 deliveries is now at 385,000 vehicles.
This represents a 13% decline year-over-year, despite Tesla currently offering record discounts and incentives, including 0% financing on both the Model 3 and Model Y in most markets.
However, it is likely that analysts are again overestimating deliveries.
Electrek’s Take
We have great data in Europe and China, where Tesla is basically down by a few thousand units despite the new Model Y being widely available during the second quarter.
The only primary market with limited data for the second quarter is the US.
The US is likely where the new Model Y had the biggest positive impact, and Tesla will need to perform well there for deliveries to surpass its Q1 2025 results.
The automaker has no chance at annual growth in the second quarter, but based on the best data available, I think it should end between 330,000 and 360,000 units – way below the current analyst consensus.
The lower end of the spectrum would result in a massive 25% drop in annual deliveries, while the higher end would result in a still significant 19% drop.
There’s no other way to cut it: Tesla’s automotive business is in crisis.
The crazy thing is that Wall Street is completely missing this story and only adjusting for the decline throughout the quarter.
At the end of the first quarter, analysts still expected Tesla to avoid a decline in deliveries in 2025, with approximately 1,850,000 vehicles.
The consensus now stands at 1.6 million units, which is still likely too high by 100,000 units, representing billions of dollars in sales.
Furthermore, they predict that Tesla will experience a resurgence in growth in 2026, despite the EV tax credit being eliminated in the US, its least affected market so far.
Tesla has minimal prospects for returning to automotive growth beyond some significant reforms that are nowhere in sight, given Musk’s leadership.
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Tesla’s stock (TSLA) crashed by as much as 5% in pre-market trading after President Trump threatened to set DOGE on Elon Musk, who has been criticizing his ‘Big Beautiful Bill’.
After being kindly shown the door to the White House last month, Musk had a brief moment of clarity and started to criticize Trump and the Republican party, which he helped elect with almost $300 million of his own money in the 2024 elections.
He highlighted how Trump’s “Big Beautiful Bill” is expected to increase the deficit and debt. The Tesla CEO even linked Trump to Jeffrey Epstein, something that has been well known for decades, but Musk conveniently ignored it as he was backing the President and wearing hats that read, “Trump was right about everything.”
Musk quickly calmed down and even apologized for “going too far” and started praising Trump again.
That didn’t last long.
Over the last few days, as the Senate attempts to pass Trump’s budget and tax bill, Musk has renewed his efforts to halt the legislation.
The CEO appeared to renew the attacks after the Senate updated the bill to kill the EV incentive sooner and to increase taxes on solar and wind projects.
However, Musk said that he doesn’t mind EV and renewable energy subsidies going away, but he believes that fossil fuel subsidies should also be removed, which is not in the plans at all.
Trump campaigned on Musk’s money, claiming that he would get America to “drill, baby, drill” again.
The CEO went as far as threatening any Senator who vote for the bill, all Republicans, to face his money in their next primary. He added that if the bill passes, he will create a new “America Party.’
Musk’s attacks have focused on the bill itself and the Republicans voting for it, but Trump likes to call it his bill, and unsurprisingly, he is unhappy with Musk.
Last night, he took to Truth Social to highlight again that Musk “would probably have to close up shop and head back to South Africa” without US government subsidies.
The President then suggested that he could have DOGE, a department that Musk created, go after him and the subsidies that his companies get:
Elon Musk knew, long before he so strongly Endorsed me for President, that I was strongly against the EV Mandate. It is ridiculous, and was always a major part of my campaign. Electric cars are fine, but not everyone should be forced to own one. Elon may get more subsidy than any human being in history, by far, and without subsidies, Elon would probably have to close up shop and head back home to South Africa. No more Rocket launches, Satellites, or Electric Car Production, and our Country would save a FORTUNE. Perhaps we should have DOGE take a good, hard, look at this? BIG MONEY TO BE SAVED!!!
Tesla’s stock dropped by more than 4% in pre-market trading following the President’s threat.
Musk responded to the President by pointing out that he is asking to remove the subsidies, but he didn’t add his usual caveat of also removing all subsidies for fossil fuel.
Electrek’s Take
It’s both sad and funny to see Elon now. It’s sad because the US is plunging back into an energy dark age of relying on fossil fuels. Still, it’s amusing because Elon is acting as if he’s just now realizing what he has done, despite everyone but a few cult members screaming at him that this was going to happen for the last year.
Elon got what he wanted out of Trump with his $300 million, and now, he realizes that his influence has limits and that Trump is going to do way more damage than just what Musk wanted out of him: to stop illegal immigration and the so scary “woke mind virus.”
The result will be a significant blow to the growth of electric vehicles and clean energy in the US, and Tesla will be affected in the process, exactly what we have been saying for the last year.
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