Exxon-Chevron Tie-Up Not as Insane as It Sounds

George T. Taft

Chevron investors may be cautious about merging with Exxon as it faces scrutiny from securities regulators and activist traders.


Callaghan O’Hare/Bloomberg News

Today’s tech stock exuberance is a flashback to the 1990s. Now oil investors are experiencing their have déjà vu.

Exxon Mobil

XOM .18%



CVX 1.42%

the two largest descendants of Rockefeller’s Regular Oil monopoly, discussed a potential merger final yr, The Wall Road Journal documented Sunday. The companies’ shares hardly moved Monday early morning, potentially reflecting skepticism that these types of a deal can happen.

As in excess of-the-major as the concept sounds—it could be the biggest company merger ever—it isn’t inconceivable. Today’s oil current market situations glimpse equivalent to those that designed oil megamergers achievable starting in the late 1990s, when the Asian financial disaster led to a sudden collapse in world expansion and oil demand. The resulting glut significantly weakened electricity giants, main to price tag cuts and paving the way for large tie-ups. The two Covid-19 and Asia’s crisis knocked about a 3rd off the normal Brent price in 2020 and 1998, respectively.

That backdrop was what preceded Exxon’s merger with Mobil in 1999, amount 1 and two in the U.S. at the time. Chevron’s 2001 nuptials with Texaco brought alongside one another what were then numbers two and 3. Combined, Exxon and Chevron would satisfy about 4.3% of worldwide oil demand—only a share place higher than the put together share of Exxon and Mobil a calendar year soon after their merger.

It is unclear how near the deal is to materializing. Antitrust problems aside, Chevron buyers may be careful about merging with Exxon as it faces scrutiny from securities regulators and activist buyers.

But the information is a apparent sign of how weakened the electrical power marketplaces have develop into. A mix would bring at minimum 4 of Typical Oil’s pieces again with each other. At the top of its dominance, Common Oil managed 95% of U.S. refining—long in advance of any individual recognized there had been extensive petroleum deposits in sites like Saudi Arabia, Iran and Venezuela and decades in advance of state companies grew to become the actual “Big Oil.”

The mere fact that Exxon and Chevron are taking into consideration the once unthinkable exhibits that their executives grasp the enormousness of the oil market’s issues.

An abundance of fossil fuels blended with innovations in technological know-how to harness wind and photo voltaic ability has sent strength charges crashing close to the earth. WSJ clarifies how it all transpired at at the time. Photo illustration: Carlos Waters/WSJ (Originally published July 21, 2020)

Produce to Jinjoo Lee at jinjoo.lee@wsj.com

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Appeared in the February 2, 2021, print version as ‘Oil Tie-Up Is not as Crazy as It Sounds.’

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