Oil companies have had a rough go since the pandemic sent their main product into a tailspin. In an effort to maintain dominance in a rapidly changing world, Exxon and Chevron, the two biggest oil companies in the U.S., apparently weighed a blockbuster merger.
The Wall Street Journal reported on Sunday night that Darren Woods and Mike Wirth, the firms’ respective CEOs, held secret talks last year about what would be one of the biggest corporate mergers in history. The paper said the talks were “preliminary and aren’t ongoing but could come back in the future.” That two companies near the top of the Fortune 500 (Exxon is third while Chevron is fifteenth) reportedly weighed a merger should give you a sense of just how rapidly change is coming at the oil industry as the sun begins to set on the era of oil.
This year was already shaping up to be one that would define the trajectory of the fossil fuel industry for years to come. News of the Exxon and Chevron merger talks only reinforces that. Both companies have seen their flames dim over the past decade, and the pandemic has cut off the oxygen they need to burn even more sharply. The economic pause that hit last spring sent oil demand and prices plummeting. The oil and gas industry shuttered exploration rigs, fell behind on loans, and shed more than 100,000 workers last year. Small firms went belly up while big ones in the U.S. and Europe faced multi-billion dollar losses. Oh, and every major American bank also jumped out of funding oil exploration in the Arctic, one of the riskiest and most likely damaging forms of extraction on Earth.
Exxon fell off the Dow Jones due to its steep losses after a 92-year run on the index and lost the title of biggest oil company in the U.S. While Chevron took its place in both regards, it’s not like it’s operating anywhere near where it was pre-pandemic. The former, meanwhile, has also been buffeted by a series of revelations that its own analysts expect it may be permanently diminished. It’s against this backdrop that Exxon and Chevron reportedly considered merging.
On the one hand, it’s not surprising given all that. On the other, these are two monster companies that if they merged, would be worth an estimated $350 billion, according to the Wall Street Journal. Twelve-figure mergers don’t normally happen, though, under everyday circumstances.
But the pandemic has made everyday circumstances evaporate. So, too, has the climate crisis. The world must cut carbon pollution by 78% this decade in order to stave off dangerous levels of global heating and all the attendant impacts. To do that will require ending the use of oil and gas (as well as coal) and decarbonizing every sector. Oil companies have a business model predicated on unending carbon pollution. Absent some breakthrough technology that doesn’t exist to suck carbon out of the sky, that line of business is just incompatible with a habitable planet.
While European oil companies have at least made weak overtures about trying to clean up their carbon pollution, Chevron and Exxon have clung fast to continuing their polluting business model. A theoretical merger could help them extract more oil at a lower cost. But in the end, that would either screw the planet or leave them sitting with a pile of worthless assets (or both!).
In any case, the merger talks didn’t appear to go anywhere. Also, what would we call this company? Chexon? Exron? It just feels wrong on naming grounds alone.
With President Joe Biden replacing more oil- and business-friendly Donald Trump in the White House, it’s unclear how regulators would handle a Big Oil mega-merger. Biden pledged last week to end $40 billion in subsidies for the industry and has said he’ll take steps to protect oil workers from the continued decline of the industry instead of protecting those in the C-suite. That leaves CEOs like Woods and Wirth in a tough spot, particularly Woods who is under pressure from activist investors to address the climate impact of the company and chart a new course. Which honestly, couldn’t happen to a nicer guy.