They’re Making Record Profits, But Oil Companies Still Won’t “Drill, Baby, Drill”

Oil companies are posting some of their biggest profits in years as the war in the Middle East pushes crude prices higher, but they aren’t drilling more. Instead, they’re sending cash back to shareholders through stock buybacks and dividends. The reason is simple: drilling more oil doesn’t guarantee more profit, and Wall Street rewards restraint over expansion.

Why aren’t oil companies increasing drilling despite record profits?

Oil companies aren’t drilling more because expanding production threatens the profit margins that record-high prices are already delivering. When a barrel of oil sells for more money, companies make more without spending a dime on new wells.

Executives openly tell investors this every earnings season. Since the mid-2010s shale bust, when overproduction crashed prices and wiped out billions in company value, oil executives learned a hard lesson: growth for growth’s sake doesn’t pay. Shareholders now demand steady returns, not aggressive expansion. That shift in Wall Street’s priorities, more than any single political policy, explains why they’re making record profits but oil companies still won’t drill, baby, drill.

The bottom line: Drilling more oil when prices are already high would eventually flood the market and push prices back down, cutting into the very profits companies are currently enjoying.

How much profit are oil companies making right now?

Big Oil’s profit margins have widened sharply as Middle East tensions squeeze global supply and lift crude prices. Refining margins and upstream earnings both benefit when oil trades well above the roughly $60 to $70 per barrel level companies typically use to plan their budgets.

For context on how large these swings can get, ExxonMobil reported a record annual profit of about $55.7 billion in 2022 during the last major global energy price shock tied to Russia’s invasion of Ukraine, and Chevron posted roughly $35.5 billion the same year. Those figures show how quickly profits can balloon when global conflict tightens supply, even without a single new well being drilled. Analysts widely expect similar patterns whenever geopolitical shocks hit oil-producing regions, since supply fear moves prices faster than any drilling decision can.

What is the “drill, baby, drill” policy, and why isn’t it working?

“Drill, baby, drill” is a political slogan, first popularized during the 2008 election, calling for expanded domestic oil and gas production to lower energy costs and boost energy independence. It is not a binding law or regulation; it’s a talking point meant to pressure companies into pumping more oil.

The problem is that oil companies answer to shareholders, not slogans. Political leaders can open more federal land for leasing or streamline permits, but they cannot force a publicly traded company to drill if drilling doesn’t improve quarterly earnings. That’s the disconnect at the center of this story: they’re making record profits, but oil companies still won’t drill, baby, drill, no matter which party occupies the White House.

Decision rule: If a company’s leadership believes new drilling will lower long-term prices and squeeze margins, expect stock buybacks and flat production, regardless of political encouragement.

Reasons oil companies aren’t expanding production

The core reasons come down to money, risk, and investor pressure rather than a lack of oil in the ground. Several factors reinforce one another to keep drilling flat even during a profit boom.

• Shareholder pressure: Investors reward stable dividends and buybacks over risky expansion.
• Memory of the 2015 to 2016 price crash: Overdrilling once destroyed billions in shale company value.
• Uncertain long-term demand: Electric vehicles and renewable energy growth make companies wary of decades-long investments.
• Labor and equipment limits: Skilled rig crews and drilling equipment are harder to scale up quickly than in past booms.
• Cost of capital: Borrowing money for new projects is more expensive than it was a decade ago.

Common mistake: Assuming oil companies are simply “sitting on oil” out of spite. In reality, most companies are following a documented, investor-approved strategy of capital discipline that predates the current Middle East conflict by nearly a decade.

How is the Middle East conflict driving oil prices and Big Oil’s profits?

War and instability in the Middle East raise fears of supply disruption, and fear alone can push oil prices higher even before a single barrel stops flowing. The region supplies a large share of the world’s crude, so any threat to shipping lanes, refineries, or production facilities sends traders scrambling.

Higher prices ripple through the entire industry. Producers earn more per barrel pumped, refiners often see wider margins, and companies with existing production simply collect more revenue without new investment. This is exactly how the war in the Middle East has sent Big Oil’s profits soaring while drilling activity barely moves. Families in the Mohawk Valley and across the country feel this at the gas pump, even though the disruption is happening thousands of miles away.

Why do oil companies prefer stock buybacks over drilling?

Stock buybacks deliver an immediate, predictable return to shareholders, while new drilling carries years of risk before it pays off. A buyback raises the stock price today; a new well might not produce oil for half a decade.

This is why companies are pocketing the money rather than expanding drilling, even as profits soar. Buybacks also let executives avoid betting billions on projects that might become worthless if demand shifts toward renewable energy sooner than expected. From a corporate finance standpoint, it’s a low-risk move. From a public policy standpoint, it means record profits circulate on Wall Street instead of funding new jobs on drilling rigs.

Quick example: A company sitting on an extra billion dollars in windfall profit can either spend it drilling a field that might produce oil in 2031, or buy back stock and boost its share price within weeks. Most boards choose the second option.

How long does it take to start a new oil drilling project, and what stops companies from drilling more?

Starting a major new drilling project typically takes three to seven years from permitting through first production, which discourages companies from reacting quickly to short-term price spikes. Offshore projects often take longer than onshore shale wells.

Several practical barriers stand in the way beyond simple corporate caution:

1. Permitting timelines for federal leases and environmental review.
2. Equipment and rig availability, which tightened after companies scrapped rigs during the 2020 price collapse.
3. Skilled labor shortages in drilling regions like the Permian Basin.
4. Financing costs, since lenders remain cautious about long-term fossil fuel investment.
5. Community and landowner negotiations for access and mineral rights.

Edge case: Shorter shale wells can go from permit to production in as little as six to twelve months in ideal conditions, but even that speed hasn’t triggered a major expansion, because short-cycle wells deplete fast and require constant reinvestment that companies aren’t eager to make.

Is there a shortage of oil drilling equipment, and do environmental regulations really block drilling?

There is a tighter, though not catastrophic, supply of drilling rigs and skilled crews compared to the mid-2010s boom, and federal environmental review adds time but is rarely the deciding factor in whether a company drills. Industry reports and rig-count data have shown active U.S. rig counts well below their historic 2014 peak for years, reflecting equipment retirements and workforce attrition after repeated boom-bust cycles.

Environmental permitting can slow a project by months, but companies routinely describe capital discipline and shareholder expectations, not regulation, as their top consideration in earnings calls. That distinction matters for public debate: loosening environmental rules is unlikely to unlock a drilling surge if the underlying financial incentive to hold back remains unchanged.

When will oil companies invest in new drilling, and how do oil prices affect that decision?

Companies typically commit to new drilling only when they expect prices to stay high long enough to guarantee profit over the multi-year life of a project, not just during a temporary spike tied to conflict. A short-term price jump from Middle East instability rarely meets that bar.

Oil executives plan around a long-term price expectation, often in the $60 to $75 per barrel range, regardless of where prices sit today. If a war-driven spike looks temporary, companies bank the extra profit through buybacks rather than committing billions to a project that needs stable high prices for years to break even.

What happened to oil production capacity after 2020?

The COVID-19 pandemic triggered a historic collapse in oil demand in 2020, and companies responded by slashing drilling budgets, idling rigs, and laying off thousands of oilfield workers. That retrenchment permanently reduced the industry’s ability to ramp up production quickly.

Many of those rigs, crews, and supply chains never fully returned. When demand rebounded, companies found it harder and more expensive to scale back up, which is part of why today’s high profits haven’t translated into a fast production surge. The pandemic-era pullback reshaped the industry’s appetite for risk in ways still visible years later, a pattern with echoes in how the country struggled to set a clear pandemic recovery goal across multiple sectors, not just energy.

A history lesson: when Big Oil chose profits over people

History shows a consistent pattern of oil companies protecting profit margins even when public safety or the planet paid the price. This isn’t a partisan claim; it’s a documented corporate record spanning more than a century.

• The Exxon Valdez spill (1989): Cost-cutting on tanker safety and staffing contributed to a disaster that dumped roughly 11 million gallons of crude into Alaska’s Prince William Sound, devastating fishing communities for years.
• Deepwater Horizon (2010): Investigations found BP and its partners made cost-saving decisions on the well that preceded the explosion killing 11 workers and spilling millions of barrels into the Gulf of Mexico.
• Climate research suppression: Investigative journalism in 2015 revealed Exxon’s own scientists warned executives about fossil fuels and global warming as early as the 1970s and 1980s, yet the company spent decades afterward funding groups that publicly cast doubt on climate science.
• Standard Oil’s monopoly (early 1900s): John D. Rockefeller’s empire crushed competitors and controlled prices until the Supreme Court broke it up in 1911 for anti-competitive practices.
• 2022 windfall profits: As Russia’s invasion of Ukraine spiked global energy prices, Exxon and Chevron posted record annual profits while American families faced some of the highest gas prices in a decade.

The through-line across each example is the same: when profit and public good collide, the industry has repeatedly chosen profit. That’s not a moral judgment made in isolation; it’s the pattern the record shows. Oil companies wave the flag of energy independence and American jobs when it’s politically convenient, but the loyalty that consistently shows up in boardroom decisions is loyalty to the shareholder, not the country. That’s the closest thing to patriotism the industry practices with any consistency, and it’s worth remembering the next time a slogan like “drill, baby, drill” gets repeated without scrutiny.

Communities feel the aftershocks of these decisions in real ways. Just as families migrating to Texas discover the boom-and-bust rhythms of oil-driven local economies, small businesses far from any oil field, including Utica shops that depend on steady foot traffic, absorb the ripple effects of energy price swings through delivery costs, heating bills, and customer spending power.

Frequently asked questions

Why aren’t oil companies drilling more if profits are so high?
Higher prices already boost profit without new investment, and expanding drilling risks flooding the market and pushing prices back down.

What does “drill, baby, drill” actually mean as policy?
It’s a political slogan calling for expanded domestic oil production; it carries no legal force over how publicly traded companies allocate capital.

Are oil company profit margins really at record highs?
Yes, during major geopolitical shocks. ExxonMobil and Chevron both posted record annual profits in 2022 during the last comparable global energy price spike.

Does the Middle East war directly control gas prices in the U.S.?
It influences global crude prices, which affect U.S. gas prices, even though the fighting itself doesn’t touch American soil or supply chains directly.

Why do companies choose stock buybacks instead of new wells?
Buybacks deliver fast, predictable shareholder returns, while drilling ties up billions of dollars for years with uncertain long-term demand.

How long does a new oil well take to start producing?
Shale wells can start in six to twelve months; larger conventional or offshore projects often take three to seven years.

Is a shortage of rigs and workers really limiting new drilling?
Yes, to a degree. Rig counts and skilled crews remain below their mid-2010s peak after repeated industry layoffs following price crashes.

Do environmental regulations block most new drilling?
Not primarily. Regulations add permitting time, but companies more often cite shareholder expectations and capital discipline as their main reasons for limiting drilling.

Conclusion

Big Oil’s playbook hasn’t changed much over the past century: protect the profit margin first, and let political slogans like “drill, baby, drill” play out in the background. War in the Middle East is padding record profits right now, and companies are pocketing that money through buybacks rather than expanding production, exactly as they did during the last global price shock in 2022.

Understanding this pattern matters because energy policy shapes household budgets across the Mohawk Valley, from heating bills in Rome and New Hartford to gas prices on every commute. Readers who want a say in how energy policy gets shaped can start close to home: attend a local town hall, ask elected officials where they stand on corporate accountability and energy affordability, and support local journalism that keeps tracking where the profits actually go. Civic pressure, applied consistently, is still the most reliable check available on an industry that has shown, again and again, exactly where its loyalties lie.