The World Is Pushing Clean Energy. Oil Companies Are Thriving.

For all of the focus on an energy transition, the American oil industry is booming, extracting more crude than ever from the shale rock that runs beneath the ground in West Texas.

After years of losing money on horizontal drilling and hydraulic fracturing, the companies that have helped the United States become the leading global oil producer have turned a financial corner and are generating robust profits. The stocks of some oil and gas companies, such as Exxon Mobil and Diamondback Energy, are at or near record levels.

The industry’s revival after bruising losses during the Covid-19 pandemic is due largely to market forces, though Russia’s war in Ukraine has helped. U.S. oil prices have averaged around $80 a barrel since early 2021, compared with roughly $53 in the four years before that.

That the price and demand for oil have been so strong suggests that the shift to renewable energy and electric vehicles will take longer and be more bumpy than some climate activists and world leaders once hoped.

Oil companies’ success is not just the result of higher prices. Under pressure from Wall Street to improve financial returns, the companies that survived the 2020 oil-price crash generally ditched the debt-fueled growth strategy that had propelled the American shale boom.

Many pared spending and cut costs by laying off workers and automating more of their operations.

Since 2021, oil and gas wells in the lower 48 states have generated more than $485 billion in free cash flow, the money left over after spending on operations and new projects, according to estimates by Rystad Energy, a research and consulting firm. In the decade prior, the industry spent nearly $140 billion more than it took in.