But oil prices are still considerably below last summer’s highs, dragging down producer revenues. That is going to mean hard choices for businesses such as international major oil companies and independent drillers, as well as for energy investors and policy makers who have benefited from the past year’s largess.

“It is moving toward companies spending what they can while they can,” said Mark Young, a senior analyst at data-analytics firm Evaluate Energy. 

How the industry uses its cash in coming years has huge implications for U.S. drivers and energy investors. Oil executives last year buoyed their stock prices by funneling most of their wartime windfalls to investors—not new drilling. As a surge in fuel costs supercharged inflation to 40-year highs, President Biden accused oil firms of profiteering and urged them to invest in boosting capacity.

Higher oil prices gradually encouraged the industry to do just that. Exxon Mobil and Chevron increased capital spending last quarter from a year ago while paying a combined $15.2 billion in dividends and buybacks.

But companies’ ability to keep investing while extending shareholder returns will get harder as their cash piles dwindle from spending and acquisitions. Exxon Mobil and Chevron have a combined $39.4 billion in cash, down from $48.4 billion at the end of the first quarter, according to FactSet.

Investment in the American oil patch last quarter outpaced shareholder returns for the first time since the Kremlin’s invasion, according to Evaluate Energy. The more than 40 oil-and-gas producers tracked by the firm boosted capital spending to $28.4 billion, while funneling a combined $25.4 billion to investors.

In 2019, that group spent an average of $24.3 billion per quarter on projects and $11.3 billion on shareholder returns. Capital spending fell sharply after the pandemic derailed U.S. demand for fuels, only recently surpassing pre-Covid levels.

Better-than-expected production in recent months led federal officials to bump their U.S. output projections for this year to a record 12.8 million barrels of crude a day. A gusher of oil this year blunted the impact of Russian and Saudi production cuts and pushed down gasoline and diesel costs in the first half of 2023.

Many Wall Street analysts expect the recent rebound in oil prices to continue, potentially giving an incentive for more drilling. The tightening market has contributed to what Goldman Sachs recently described as a turning point in capital spending—fueled by a promise of higher returns and a growing focus on energy security.

Other investors remain wary about boosting production. The U.S. and European Union are encouraging more clean energy with a wave of subsidies intended to curb fossil-fuel use in the coming decades. Some experts warn that the best land for oil-and-gas extraction in the U.S. has already been drilled. 

That has left many companies trumpeting cost cuts and new technologies that can more quickly drill longer wells through shale rock. The message to investors: Oil-and-gas producers can increasingly do more with less. 

“This is not just one-off execution,” Toby Rice, CEO of independent natural-gas producer EQT, told analysts last month.