American oil executives delivered a bleak message to Trump officials in recent days: The energy crisis the Iran war has unleashed is likely to get worse.
In a series of White House meetings Wednesday and recent conversations with Energy Secretary Chris Wright and Interior Secretary Doug Burgum, the CEOs of Exxon Mobil, Chevron and ConocoPhillips warned that the disruption to energy flows out of the vital Strait of Hormuz waterway would continue to create volatility in global energy markets, according to people familiar with the matter.
In response to questions from the officials, Exxon CEO Darren Woods said that oil prices could rise past current elevated levels if speculators unexpectedly bid up prices and that markets could see a supply crunch of refined products. Chevron CEO Mike Wirth and ConocoPhillips CEO Ryan Lance also conveyed their concerns about the scale of the disruption, these people said.
President Trump didn’t attend the Wednesday meetings. U.S. oil prices have climbed from $87 a barrel that day to $99 a barrel Friday.
The White House has implemented or is considering several measures it hopes will lower oil prices—including further easing sanctions on Russian oil, a massive release of emergency energy reserves and possibly waiving a statute that limits crude flows between U.S. ports. Administration officials have also told oil chief executives that they are hoping to increase the flow of oil between Venezuela and the U.S., a White House official said.
Burgum said the administration has been “working around the clock” with energy companies to stabilize global energy markets. Wright and the Trump administration will continue to take action to minimize disruptions to energy supplies, Energy Department spokesman Ben Dietderich said.
The meetings were described as productive, and none of the executives blamed the Trump administration for the crisis. But many in the oil industry fear that the menu of options available can do little to stem the crisis and that the only solution is to reopen the Strait of Hormuz, through which flows a fifth of the world’s daily supply of oil and liquefied natural gas. Otherwise, the strain of prolonged high prices could weigh on the global economy and crimp fuel demand.
“The world does not need $120 oil,” said Steven Pruett, chief executive of Midland, Texas-based oil producer Elevation Resources. “It’s going to cause economic destruction.”
A senior administration official said that the administration knows prices are going to continue to rise but there isn’t a lot it can do at the moment. The Pentagon has told the administration that options exist to open the strait, and the administration wants that to happen in a matter of weeks, not months, the person said.
Iran’s attacks on ships are surging in and around the narrow strait and the U.S. oil benchmark is currently hovering around $99 a barrel. Announcements this past week that the U.S. would ease sanctions on Russia and contribute to the largest-ever emergency oil release—some 400 million barrels—have done little to quell prices.
“We do crisis management exercises…the big one has always been something in the Middle East that shuts the Strait of Hormuz,” Wirth said this past week on the “Ruthless Podcast.” “Markets are very uncomfortable, uncertain, volatile and unpredictable.”
Some oil executives say they are bracing for a prolonged period of high oil prices that may boost their profits in the short term but could ultimately damage the industry and the economy.
Trump in a Truth Social post on Thursday played down concerns about higher energy prices, saying that the U.S. is the world’s largest oil producer, “so when oil prices go up, we make a lot of money.”
For the past decade, the U.S. oil industry has tried to break the cycle of booms and busts that has plagued it for much of its existence. While prices topping $100 a barrel benefit producers in the short-term, these levels hurt consumers in the long-term and prompt them to consume less fuel, which in turn can cause a steep drop in crude prices. Producers then have to slash production, cut costs and fire staff. Investors have pressured them to keep spending in check and not chase higher oil prices.
Burgum said in a recent CNBC interview that he had met with American companies recently and that he expected them to announce increased production in response to higher prices. But any domestic production increases are likely to be modest, industry executives say, and won’t replace the roughly 9 million to 10 million barrels of oil a day analysts say are currently trapped behind the Strait of Hormuz.
“The big boys are maintaining discipline and returning cash to shareholders, or buying back stock,” said Mike Oestmann, CEO of Tall City Exploration in Midland.
In the past two weeks, U.S. officials including Burgum have had discussions with Exxon and ConocoPhillips about returning to Venezuela to invest billions into the Latin American country’s dilapidated oil fields, the White House official said.
Trump hosted oil executives at the White House after the operation to capture Nicolás Maduro in January to discuss increasing oil production in Venezuela. But CEOs initially responded tepidly to Trump’s demands that they invest billions of dollars there.
Trump’s lieutenants want to use Venezuela’s oil to help shore up fuel-supply chains in the Western Hemisphere, according to the White House official. Exxon has told the Trump administration that it is evaluating the prospect of sending a technical team to that country later this month. Chevron, the only major U.S. oil company active in Venezuela, told U.S. officials earlier this month that its oil production in the country has reached record levels and that it is aiming to pump more, this official said.
Exxon and ConocoPhillips pulled out of Venezuela in 2007 after then-President Hugo Chávez nationalized their assets. Both are trying to recoup billions they are still owed.
Write to Collin Eaton at collin.eaton@wsj.com and Benoît Morenne at benoit.morenne@wsj.com