When we think of huge corporations, oil and gas firms and banking institutions are the first companies that come to mind. They are huge enough to significantly boost the economy of the place where they locate their refineries, branches and offices. Royal Dutch Shell, Petrobras Petroleo Brasil, PetroChina and Chevron are some of the companies that are considered as the largest in the world.
The biggest of them all, however, is Exxon Mobil Corporation. Exxon Mobil is an American multinational oil and gas corporation involved in the manufacture and marketing of petrochemical products, like aromatics, olefins, polypropylene plastics and polyethylene. It is also involved in electric power generation. Among its affiliates are ExxonMobil, Exxon, Esso and Mobil.
The company was actually only established in 1999 through the merger of Mobil and Exxon. It has its headquarters in Irving, Texas. Ironically, both companies were established after courts in the United States mandated the breakup of Standard Oil in 1911.
3 By the Numbers
Exxon Mobil’s is in the energy business, be it in the exploration or production of crude oil and natural gas, or the manufacture of petroleum products, or the transport and sale of all these. It is the largest company in the world in terms of profits, with numbers reaching $41.1 billion. It is number two in market value with capitalization of $407.4 billion, number 3 in sales with $433.5 billion, and number 82 in assets with $331.1 billion.
The company is also considered as the largest refiner in the world, with 37 refineries located in 21 countries operating at a capacity of 6.3 million barrels per day. Its daily production is 3.921 million barrels of oil daily, and its reserves account for less than a percent of the world total.
Subsidiaries include Imperial Oil Limited, a Canadian company, and SeaRiver Maritime, a petroleum shipper. ExxonMobil’s upstream division, which includes oil exploration, extraction, shipping and wholesale operations, is based in Houston. It employs more than 27,000 people. The downstream unit, which includes marketing, refining and retail, is based in Virginia. It has more than 4,000 employees.
2 Company Roots
Exxon and Mobil were two separate companies until 1999, when they combined in the largest merger in U.S. corporate history. Both companies can trace its roots, however, to John D. Rockefeller’s Standard Oil.
Rockefeller, his brother William, and several other partners established standard Oil in 1870. The company was able to absorb or destroy its competitors in a two-month period in 1872. The tactics were then used to enable the company to control the entire northeastern part of the U.S.
The purchased firms would then be assessed by Rockefeller, with those considered as inefficient closed down immediately. Whatever was left of the competition was further choked after Standard Oil leveraged its size and production volume to get a huge 71 percent discount from the railroad companies used in transporting its products. As smaller companies did not have the size to get the same discount, they got forced out of the business.
The tactics employed by the company proved to be highly effective. By 1904, it had under its control up to 91 percent of all production and 85 percent of sales. Standard Oil would also resort to under pricing that competitors cannot match because they did not have the fluid cash flow brought about by Standard’s control of the market. Eventually, all these tactics came under scrutiny, as legislators became concerned that a complete 100 percent control of the market would result into a monopoly. In the absence of any competition, it would allow the company to set whatever price they would want.
Concern on the detrimental impact of a monopoly had given rise to the Sherman Antitrust Act of 1890. It forbade any contract, scheme, tactic, deal or conspiracy that would ultimately restrain trade. Increased public outcry against monopolies, especially that of Standard Oil, led to a lawsuit filed in Ohio against the company.
In 1911, the Supreme Court declared with finality that Standard Oil was in violation of the Antitrust Act. The company was thereafter ordered to break up into 34 independent companies with different and non-interlocking boards of directors. Among the companies formed were the Standard Oil of New Jersey, which later on became Exxon, and Standard Oil of New York, the company that became Mobil.
Both companies grew larger separately. Stiff competition from other companies led to a review of its operations and suggestions of a possible consolidation. In 1998, the giant oil firms signed an agreement worth $73.7 billion to merge the two companies under Exxon Mobil Corporation. Shareholders and government regulators were consulted, and after obtaining approvals from both, the merger was finalized in 30 November 1999.
1 Controversies and Disasters
The oil and gas business are inherently dangerous businesses. There are a lot of geopolitical dealings involved, not to mention the risks to the environment that the exploration and transportation of oil and gas products bring.
True enough, in 1989, a major environmental disaster struck the company when one of their oil tankers, the Exxon Valdez, hit the Bligh Reef in Prince William Sound off the coast of Alaska. As a result, 11 million U.S. gallons of oil spilled into the water, making it the second largest oil spill in the history of the country. The U.S. Congress rushed to pass the Oil Pollution Act of 1990 because of this calamity. A lawsuit was brought against Exxon, and the lower court initially levied a punitive damage to the company amounting to $5 billion. After going through the appeal process, the U.S. Supreme Court reduced the punitive payment to $507.5 million, with the decision being released in 2008 with Exxon and Mobil already merged.
The Daily Telegraph of London also adjudged ExxonMobil as one of the most hated corporations in the world. The 1989 oil spill was the primary reason, but it did not help that a former top executive of the corporation was skeptical about climate change as recent as 2005 and declared his dislike for any government interference. The company also deals with brutal dictatorial governments, drilling in terrains in Chad and Equatorial Guinea.