3 Reasons Why Congress Should Not Be Concerned with Oil & Gas Consolidation

Despite alarm bells in Washington, the current M&A wave in Oil & Gas will benefit the consumer, the country, and the planet. 

By Adam Hirschfeld, VP of Sales

Senate Majority Leader Chuck Schumer of New York recently sounded the alarm about two high-profile Oil & Gas deals: ExxonMobil’s $60 billion purchase of Pioneer Natural Resources and Chevron’s proposed $53 billion acquisition of Hess. Schumer and 22 other Democratic senators asked the Federal Trade Commission to review the agreements for potential anticompetitive harm, and to block the deals if necessary. “The oil-and-gas industry is still dominated by a handful of corporate giants, led by the top-two players Exxon and Chevron,” the lawmakers wrote in a letter to the FTC. “Any further consolidation could harm American consumers.”  

There’s good reason to take antitrust concerns seriously. No one wants to stifle competition or for consumers to pay higher prices. But, simply put, that is not happening as a result of these consolidation deals — or the rest of the current M&A wave which, as I’ve previously explained, will bring seismic shifts to the industry.

Given the level of panic in some quarters — the Democratic coalition suggested the FTC should reexamine the past mergers that created Exxon and Chevron to investigate whether the companies “should be broken up once again” — it’s important to go beyond the headlines and unpack the nuances to understand why the senators are barking up the wrong tree. 

Not only do these deals support a competitive energy market, I believe they are healthy for the industry, the consumer, US energy security, and even the planet. Let’s dig in.

This is Not Standard Oil 2.0

To put this in context, let’s think back to Standard Oil. The company that made John D. Rockefeller among the wealthiest Americans of all time was the world’s biggest petroleum company until 1911, when the US Supreme Court ruled it was an illegal monopoly. Standard Oil squeezed everyone out, upstream and downstream, and ran distribution like an iron fist, refusing to refine their competitors' products.  

Simply stated, that’s not happening now. In today’s Oil & Gas industry, the upstream, midstream, and downstream spaces remain highly fragmented. Based on that one filter alone, this is not Standard Oil. We don’t see Chevron or Exxon midstream at scale. They are the two most integrated companies in the US, but they still don't have the midstream piece so they're not capable of blocking other producers from getting their product refined and into the market. If Exxon or Chevron controlled pipeline throughput, it would be more worrying. But right now the competition remains healthy. 

Consolidation Benefits the Consumer — and the Planet

When it comes to Main Street, the cost of oil hits consumers when they fill up their car or power their home. Another huge cost comes in terms of emissions. Families feel the impact of the first one viscerally when they look at their bank account; the second is a bit more abstract, but we all know it matters. 

M&A activity will allow Oil & Gas companies to be more efficient when they produce oil while simultaneously enabling them to increase production, which puts downward pressure on prices.These transactions also unlock new levels of scale, which enable them to spread sustainability investments across a larger operational footprint and financial plan. 

Companies like Exxon and Chevron operate with higher standards for compliance and emissions reduction, as well as project and land management. When they acquire a company, they bring their standards to that organization and can invest more in things like oilfield electrification, methane emissions reduction, carbon capture, and true diversification initiatives like geothermal and green hydrogen. This leads to a reduced carbon footprint and cleaner emissions, which is better not just for consumers at home, but for the planet at large.

The M&A Wave Enables Energy Security

Energy security doesn’t quite make the headlines like the cost of gas, but it’s one of the most important parts of this conversation. Not only is the stability of our homegrown energy supply vital to our national security, it creates myriad economic advantages that stem from stable access to energy at an affordable price relative to the rest of the world. More efficient oil production and the lower cost of oil also give consumers in the US stronger footing relative to OPEC. 

We need a counterbalancing force against OPEC because they don’t have our best interests in mind. For example, OPEC can decide to make cuts to oil supply to maintain higher prices, which hurt our economy and directly impact the buying power of people on Main Street. These M&A deals will enable Exxon, Chevron, and others to provide a more stable supply of oil domestically, which is the only way to counterbalance OPEC, guarantee supply at home, and thereby control our own destiny. 

Takeaway: There is Strength in Consolidation

We will continue to see M&A activity reshape the Oil & Gas landscape. A recent opinion piece in The Hill posits that “industry consolidation has not been the result of the conspiracy that these senators theorize. Rather, it is a natural outcome of various forces at work in the market.” I agree. Not only are these Oil & Gas acquisitions consistent with a robust, competitive energy market, they stand to usher in a new era of energy production that benefits the consumer, the environment, and the country.

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Adam Hirschfeld is an industry veteran who worked in field operations and project management before shifting to leadership roles focused on business development in the labor project management space. As VP of Sales, he stewards the voice of the client to drive innovation across the Workrise suite of products. Adam lives in Colorado, where he enjoys skiing and hiking with his family.

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