Investors in Chevron may be wary of a merger with Exxon, as the company is overseen by securities regulators and activist investors.


Callaghan O’Hara/Bloomberg News

Updated February 1. 20 at 2:28 p.m. Eastern time.

The current technical abundance of stocks is a step down from the 1990s. Oil investors are now experiencing their own déjà vu.

Exxon Mobil

XOM 0.18%.



CLC 1.42%.

two key descendants of Rockefeller’s monopoly on Standard Oil, discussed a possible merger last year, the Wall Street Journal reported on Sunday. Shares of both companies barely moved Monday morning, perhaps indicating some skepticism about the possibility of such a deal.

Even though the idea seems to be the largest corporate merger in history, it is unthinkable. Current oil market conditions resemble those that have enabled mega-mergers in the oil sector since the late 1990s, when the Asian financial crisis led to a sudden collapse in global growth and demand for oil. The resulting viscosity has significantly weakened the energy giants, lowering costs and paving the way for more interconnections. Both Covid-19 and the Asian crisis reduced the average price of Brent crude oil by about a third in 2020 and 1998.

It was in this context that Exxon merged in 1999 with Mobil, then number one and number two in the United States. Chevron’s marriage to Texaco in 2001 then brought together numbers two and three. Together, Exxon and Chevron would supply about 4.3% of world oil demand, one percentage point more than the combined share of Exxon and Mobil one year after the merger.

It is not clear to what extent the agreement is about to be concluded. In addition to antitrust concerns, investors in Chevron may be wary of a merger with Exxon, as the company is controlled by securities regulators and activist investors.

But this news clearly shows how weak the energy markets have become. This combination brings back at least four pieces of Standard Oil. At the height of its dominance, Standard Oil controlled 95% of U.S. oil refineries long before anyone realized that places like Saudi Arabia, Iran, and Venezuela had huge oil fields, and decades before state-owned companies were the real Big Oil.

The fact that Exxon and Chevron are considering the unthinkable shows that their leaders understand the magnitude of the problems in the oil market.

The abundance of fossil fuels, combined with the development of wind and solar technologies, has driven down energy prices worldwide. WSJ explains how it all happened at the same time. Photographic illustration: Carlos Waters/WSJ (originally published July 21, 2020).

Email Jinju Lee at [email protected].

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