If American motorists are enjoying the cheapest gas in years, oil companies are taking a big hit from slumping crude prices.
Royal Dutch Shell (RDS.A) said Thursday that its profits in the last three months of 2015 had fallen $1.4 billion, a whopping 44 percent drop from the year-ago quarter. In a call with Wall Street analysts to discuss the latest results, company executives sought to emphasize that the company is moving to cut costs to adapt to what CEO Brian Van Beurden described as a "challenging industry environment."
Exxon Mobil (XOM) also reported a sharp downturn in earnings this week, as its fourth-quarter profits fell to their lowest level in more than a decade. BP's (BP) earnings took an even bigger dive, plunging 91 percent in its latest quarter and spurring the British oil giant to announce thousands of job cuts.
Over the longer term, the question for consumers and energy players is the same: How long will low oil prices last?
"There is a reasonable probability oil prices hit bottom in January 2016," Wells Fargo Securities oil analyst Roger Read said. He sees oil prices rising "toward $45 a barrel" in the second half of 2016.
Finance Professor Gianna Bern of Notre Dame University, who studies the oil market, also foresees "a modest rebound" from the low of $27.10 a barrel on January 20 to "the 40's" by year end.
The stock and oil markets seem to be heading in that direction, too. The price of West Texas Intermediate crude, the U.S. benchmark, jumped over $30 a barrel on Wednesday and is now at $32.48.
But predicting oil pricing is always a dangerous game.
"This downturn has run deeper and longer than almost anyone would have guessed two years ago," said Pavel Molchanov, oil analyst with Raymond James. As late as October 2015, big oil executives were still predicting their cash flow at $50 a barrel.
The latest catalyst for lower oil prices came last month when weaker-than-expected Chinese manufacturing data intensified concerns about slowing growth in the world's second-largest economy.
That news came on the heels of a glut of overproduction from Saudi Arabia and its OPEC partners, as well as other major players such as Russia and Iran, which, now that the embargo is lifted, has been making deals with partners all over the globe.
U.S. oil supplies in the past year also outpaced the growth in global demand, according to the American Petroleum Institute.
While oil prices normally reach bottom when producers aren't making money, an ideological battle between Saudi Arabia and Iran has been keeping Saudi oil coming even when it hurts Saudi social programs and the Saudi OPEC partners even more, analysts say.
"You can't predict the actions of politicians," Bern said.
Ironically, the earnings plunge at BP, ExxonMobil and Royal Dutch Shell may boost oil prices. The industry has announced major cutbacks, including at least 10,000 layoffs by Shell announced today.
Investors seemed heartened by the cost-cutting, pushing the company's stock price up 3.9 percent to $44.67. The shares remain down from a 52-week high of $67.16.
"We're seeing austerity on steroids," Molchanov said. "Shell and the others will do everything possible to protect their dividends because many of their shareholders are dividend investors."
That means big oil will be cutting drilling rigs, headcount and future projects by up to 25 percent, Molchanov predicts, while smaller drilling and exploration firms will take deeper cuts of 50 percent.
For some it may be too late. "We expect a shakeout in the U.S. oil and gas industry as highly leveraged companies will be forced to declare bankruptcy," predicts forecasting firm Oxford Economics.
Less oil production could ultimately bring the price of oil back toward at least $40 a barrel, although analysts note that is unlikely to happen until the market works through the excess supply that has pushed prices down.
For the oil market, this may be déjà vu all over again, Wells Fargo's Read said. "This may not be as bad as it gets, but it's close," he said, pointing to the plunge of July 1986, when oil hit its low price in comparison with gold. "The indicators are pointing up."