Chevron Hits 3M Barrels a Day, CEO Warns Supply Cushions Are Shrinking—What Investors Need to Know
Chevron(NYSE: CVX) CEO Mike Wirth has been sounding the alarm on the growing impact of geopolitical turmoil in the Middle East. In the near term, his warnings merit attention. For those with a longer horizon, the energy sector—and Chevron in particular—may be worth a closer look. Here’s the breakdown.
The ongoing conflict in the region has rattled global energy markets, squeezing oil and natural gas supplies. These are essential commodities, so any disruption quickly translates into higher prices. Most investors focus on that headline, but Wirth sees a deeper, more lasting issue: even after hostilities subside, the energy market will take time to rebalance.
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That suggests energy prices may not have peaked. Wirth emphasizes that the supply buffers used to offset short-term mismatches are depleting rapidly—and the drawdown accelerates daily. Chevron, producing 3 million barrels of oil per day, has a front-row seat to this trend. When an industry insider like Wirth warns of potential gasoline shortages in certain regions, it’s worth paying attention.
Against this backdrop, a short-term play on rising energy prices might involve buying a U.S.-focused upstream producer like Devon Energy(NYSE: DVN). But investors are emotionally driven, and once the conflict ends, oil prices could drop quickly—bad news for Devon and any pure-play producer.
Chevron’s business, however, goes far beyond drilling. It also transports energy (midstream) and processes it (downstream). This diversification helps smooth out the frequent, sharp swings in the energy sector. Moreover, Chevron boasts one of the strongest balance sheets among its integrated peers, with a debt-to-equity ratio of just 0.25x. That gives it the flexibility to take on debt during downturns, sustaining operations and dividend payments until prices recover.
The real investment story here isn’t about high energy prices—it’s about volatility. Wirth expects the current energy situation to get worse before it gets better. But long-term investors should consider the full energy cycle. Given the world’s dependence on oil and gas, some exposure to the sector makes sense.
Trying to time oil price swings with a stock like Devon is likely not the best approach for most. A company built to endure the full cycle, such as Chevron, is probably a wiser choice. Its decades-long streak of annual dividend increases speaks to its resilience. When oil prices eventually fall, you can focus on the reliable dividend checks—currently yielding 3.7%, well above the market average.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
This article was originally published by The Motley Fool under the headline: “Chevron Produces 3 Million Barrels a Day, and Its CEO Says Supply Buffers Are Running Out. Is It Time to Buy?”