Merging to Survive

In October 2023, ExxonMobil paid $60 billion for Pioneer’s Permian Basin assets—not because they wanted to, but because they had to. Chevron, meanwhile, acquired Hess for $53 billion in July this year while late last year Occidental Petroleum paid $12 billion for CrownRock. All were part expansions, part defensive manoeuvres, like a chess player sacrificing pieces to prolong a losing game.

The modern wave of consolidation of oil and gas began after the 1998 oil price crash, leading to a flurry of mega-mergers including BP-Amoco (1998), Exxon-Mobil (1999), BP Amoco-ARCO (2000), Chevron-Texaco (2001), and Conoco-Phillips (2002). 

Since 2020, US oil and gas companies have spent over $380 billion buying up other fossil fuel firms, with an astonishing $234 billion in 2023 alone. As investors demand more reliable profits, companies are divesting less-productive assets, such as mature oil and gas fields with declining returns, and concentrating on their most profitable operations, including large integrated projects with extensive contiguous acreage that enable greater economies of scale, as well as high-quality reservoirs like those in the Permian Basin. The shale oil industry, once crowded with hundreds of small players, is now being swallowed whole by a few major companies looking for efficiency, scale and better returns.

While the growth of ever fewer, larger firms may seem superficially like a signal of industry strength, it is instead a symptom of deeper systemic pressures, as aggregate profits shrink amid falling prices and rising costs.[1] Far from a temporary trend, this consolidation is an inevitable outcome of capitalism’s fundamental law: firms must either expand, integrate, monopolize or face extinction.