The shrinking of Big Oil

Big Oil aren't the giants they pretend to be, explains Gaurav Sodhi.

A list of the biggest businesses on the planet tells much about the state of the world. Half a century ago, that list was dominated by heavy industrials and chemical businesses; during the 1990s it was technology companies that monopolised top positions. Today, Apple sits upon the company throne, a prodigious product of our times or, perhaps more cynically, the consummate forger of our desires. Despite changes in business and upheavals of technology, oil companies are consistently among the biggest, most profitable businesses in the world.

We are all used to thinking of the likes of Exxon, Chevron, Shell and BP as giants who dominate their industries (the paranoid among us claim they dominate far more than that) but the truth is very different.

ExxonMobil, the largest of the international ‘supermajors’ is among the most profitable businesses anywhere, generating net profits of US$45bn last year when it produced about 3% of global oil supply. That makes Exxon the 7th largest oil producer in the world. The largest is Saudi Aramco, producing 12% of global output, followed by the National Oil Company of Iran with 5% of output. In fact, national oil companies account for 8 of the 10 largest oil producers.

When ranked by reserves, however, we begin to recognise how puny and insignificant the ‘supermajors’ really are. ExxonMobil controls just 0.8% of reserves; BP just 0.7%. The three largest non-government oil companies control less than 2% of reserves. In comparison, the national oil companies of Saudi Arabia, Iran and Venezuela control over 40% of reserves. Even CNPC, China’s national oil company, controls several times the reserves of the largest supermajor.

With much of the world’s oil reserves tightly in the grasp of (often hostile) national oil companies, it’s only a matter of time before the relevance of the ‘supermajors’ starts to fade. Exxon’s place among the world’s biggest businesses won’t last.

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