“This time is different” may be the most dangerous words in business: billions of dollars have been lost betting that history won’t repeat itself. And yet now, in the oil world, it looks like this time really will be.
For the first time in decades, oil companies aren’t rushing to increase production to chase rising oil prices as Brent crude approaches $70. Even in the Permian, the prolific shale basin at the center of the U.S. energy boom, drillers are resisting their traditional boom-and-bust cycle of spending.
The oil industry is on the ropes, constrained by Wall Street investors demanding that companies spend less on drilling and instead return more money to shareholders, and climate change activists pushing against fossil fuels. Exxon Mobil Corp. is paradigmatic of the trend, after its humiliating defeat at the hands of a tiny activist elbowing itself onto the board.

The dramatic events in the industry last week only add to what is emerging as an opportunity for the producers of OPEC+, giving the coalition led by Saudi Arabia and Russia more room for maneuver to bring back their own production. As non-OPEC output fails to rebound as fast as many expected -- or feared based on past experience -- the cartel is likely to continue adding more supply when it meets on June 1.
‘Criminalization’
Shareholders are asking Exxon to drill less and focus on returning money to investors. “They have been throwing money down the drill hole like crazy,” Christopher Ailman, chief investment officer for CalSTRS. “We really saw that company just heading down the hole, not surviving into the future, unless they change and adapt. And now they have to.”

Stocks are selling off largely on higher-than-expected inflation—a negative for stock valuations, which are already high.



All three major U.S. indexes are down in recent trading, with the Dow Jones Industrial Average falling 462 points, or 1.4%, the S&P 500 dropping 1.2%, and the Nasdaq Composite declining 0.9%.


1. Inflation is still scaring investors. Input prices in the United Kingdom’s producer-price index rose 9.9% year over year in April, higher than the expected 4.4% rise. Such an increase in costs makes it likely that companies will raise prices, which would cause high consumer inflation, a dynamic recently seen in the U.S.


If inflation runs hot enough, the Federal Reserve could take actions that would raise interest rates—and higher rates reduce stock valuations because they erode the present value of future cash flows. “Inflation fears continue to grip markets,” writes Tom Essaye, founder of Sevens Report Research.