Exxon, Chevron Tie-up Not as Crazy as It Sounds

As over-the-top as the concept sounds—it could possibly be the biggest company merger ever—it isn’t inconceivable. Right this moment’s oil market circumstances look comparable to people who made oil megamergers doable beginning within the late Nineteen Nineties when the Asian monetary disaster led to a sudden collapse in international progress and oil demand. The ensuing glut significantly weakened power giants, resulting in price cuts and paving the way in which for large tie-ups. Each Covid and Asia’s disaster, respectively.

That backdrop was what preceded Exxon’s merger with Mobil in 1999, primary and two within the U.S. on the time. Chevron’s 2001 nuptials with Texaco introduced collectively what had been then numbers two and three. Mixed, Exxon and Chevron would fulfill about 4.3% of worldwide oil demand—solely a share level greater than ExxonMobil’s share a yr after their merger.

It’s unclear how shut the deal is to materializing. Antitrust considerations apart, Chevron buyers may be cautious about merging with Exxon because it faces scrutiny from securities regulators and activist investors.

However the information is a transparent signal of how weakened the power markets have grow to be. A mix would carry no less than 4 of Normal Oil’s items again collectively. On the top of its dominance, Normal Oil managed 95% of U.S. refining—lengthy earlier than anybody realized there have been huge petroleum deposits in locations like Saudi Arabia, Iran and Venezuela and a long time earlier than state firms turned the actual “Massive Oil.”

The mere indisputable fact that Exxon and Chevron are contemplating the as soon as unthinkable reveals that their executives grasp the enormousness of the oil market’s challenges.

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