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After a Bruising Year, the Oil Industry Confronts a Diminished Future

Through much of the last year, investors soured on Exxon, and Wall Street was rife with rumors that the company would slash its dividend to preserve cash. The share price had plummeted by roughly half from early last January — sinking as low as $31 in November, its lowest level in nearly 20 years.

But Exxon’s share price has climbed back to about $46, principally because energy prices have recovered strongly in recent weeks. Oil prices are up by nearly 10 percent this year, and the blizzard in the Northeast is driving up natural gas prices because the fuel is used to heat homes and businesses. Exxon’s dividend now appears safe. And aside from the write-downs, Exxon made a small profit in the last three months of the year.

“The industry has been to hell and back,” said Michael C. Lynch, president of Strategic Energy and Economy Research. “They’ve mostly survived the worst circumstances they have ever faced, and it’s all but certain things will look up from here in terms of price and demand.”

Goldman Sachs has predicted that oil prices could rise another $10 a barrel, to as high as $65 by July. That would be a remarkable recovery from prices that languished at less than half that for much of 2020, though it would remain far below prices of a decade or so ago, when a barrel of oil surpassed $140 and oil companies were making record profits.

The industry has suffered repeated shocks in recent years, with prices plummeting during the recession that started in December 2007, again in 2015 when OPEC flooded the market with crude to undercut American production, and last year, when the pandemic took hold.

The industry’s pain forced many companies to lay off employees and cut dividends. Dozens of once high-flying businesses, like Chesapeake Energy, declared bankruptcy in recent years.

Even now, when conditions seem to be improving, the industry’s prospects remain uncertain. Because of the emergence of new coronavirus variants, it is not clear how quickly the United States, Europe and other major economies will get virus spread under control. And then there are the larger questions about climate change.

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