In light of the recent drop in global oil prices, oil and gas giant Chevron Corp has announced a new plan to survive the crisis. The US energy company announced on Tuesday that it plans to cut its capital spending budget by as much as $4 billion this year.

The announcement is the latest in a slew of cost-cutting plans unveiled by oil and gas giants around the world. Oil companies are now scrambling to shore up their finances as the industry faces severe challenging brought about the ongoing coronavirus epidemic, the dramatic drop in global oil prices, and the declining demand.

Since the start of the year, global oil prices have dropped by more than 60 percent. The dramatic slide was caused by a combination of factors that ultimately led to decreased demand for the resource. The spread of the coronavirus crippled the global travel industry, leading to decreased demand for gasoline and jet fuel use worldwide.

The recent collapse of the pact between Russia and Saudi Arabia had also resulted in uncertainty in the industry. Major players are now competing for market share by increasing their production, flooding the market with surplus oil. Industry data shows that the global demand could drop by more than 12 million barrels per day in the coming months.

Apart from Chevron, other oilfield service leaders and independent refiners also announced plans to reduce expenses this week. This included companies such as Haliburton, Schlumberger, Philipps 66, and Suncor.

Chevron CEO, Michael Wirth, mentioned in an interview that the move to reduce spending was necessary given the unprecedented oil price environment. Instead of its initial plans of spending around $20 billion this year, the company has decided to reduce it to $16 billion, its lowest annual spending budget since 2005.  This will mostly affect the company's spending in the Permian Basin, the country's top share field.

Chevron's share prices had surged by as much as 21 percent after its announcement on Tuesday. The stock closed at $65.73 per share at the end of the day as investors cheered the company's decision to cut its spending. Despite the rally, the stock itself is still down by 46 percent since the start of the year.

Analysts from Goldman Sachs had already expected a dramatic decrease in capital spending by oil companies given the current state of affairs. Analysts expect that capital expenditure for 2020 could drop by as much as 35 percent overall. This would result in a drop in oil production in the US by more than 1.4 million barrels per day by 2021.