LONDON, July 24 (Reuters) – Exxon Mobil and Chevron’s recent major acquisitions raise a provocative question: does the U.S. still need two energy titans, or might it be more efficient for the two to join forces?
An $800 billion combination would certainly evoke memories of Standard Oil, the conglomerate John D. Rockefeller created in 1870 that dominated the American oil industry before the Supreme Court branded it an illegal monopoly in 1911, forcing it to break up into multiple companies from which Exxon and Chevron trace their roots.
Concerns about a new behemoth monopolizing the U.S. energy industry are probably smaller today than in the early twentieth century, given the scale and diversification of the current sector. Nevertheless, a merger of such magnitude would face daunting legal and logistical complexities.
But never say never. Growing volatility in energy prices amid the bumpy global transition away from fossil fuels, shifts in market leadership, heightened geopolitical tensions, and the related rise in resource nationalism could create a confluence of circumstances in the coming years that might make a ‘ChExxon’ merger more than a fantasy.
WAVES OF CONSOLIDATION
Over the decades, the oil and gas sector has gone through several waves of consolidation largely driven by the need to increase scale, improve efficiency and better enable companies to weather periods of weak commodity prices.
The modern era’s first wave of consolidation followed the oil price crash of 1997, which sparked a cycle of mergers that formed today’s so-called ‘Big Oil’ companies: Exxon Mobil (XOM.N), opens new tab, Chevron (CVX.N), opens new tab, Shell (SHEL.L), opens new tab, TotalEnergies (TTEF.PA), opens new tab and BP (BP.L)
The latest consolidation wave, which is centred in the United States, began in 2022 when companies gobbled up rivals to increase their access to high-quality resources as boards shifted their focus to shareholder returns, rather than output, following years of rapid expansion in shale basins.
This included Exxon’s acquisition of Pioneer Natural Resources for $60 billion, ConocoPhillips’ $23 billion acquisition of Marathon Oil and Diamondback Energy’s $26 billion acquisition of Endeavor Energy