U.S. Oil Consolidation: What Does It Mean For My Wallet?
The U.S. produces 13.5 million barrels of oil daily, the most of any country globally, and is on track to exceed 14 million by the end of 2024, per the U.S. Energy Information Administration.
That oil production will come from fewer companies as the industry undergoes significant consolidation:
- ExxonMobil acquired Pioneer Natural Resources for $59.5 billion in Oct. 2023.
- Chevron acquired Hess for $53 billion in Oct. 2023.
While these deals are not finalized as the FTC investigates whether these potential transactions could be anti-competitive, these would be the two largest transactions for any industry in 2023.
What does it mean for my wallet?
The consolidation of the oil industry likely hurts U.S. consumers and their wallets. Supply and demand dictate oil prices. In recent years, smaller oil companies financed by private money have been ramping up production, increasing the overall oil supply in the U.S. market. Conversely, larger oil companies have been highly disciplined and maintained their production pace. As a result, these smaller oil companies have helped to decrease the price per barrel by increasing supply. So, as ExxonMobil and Chevron scoop up smaller oil companies, they have more control of the overall supply in the U.S. and can artificially keep prices high. And while U.S. oil is connected to global oil prices, the U.S. is considerably less reliant on importing oil than we were in the past. As of 2022, we import 8.33 million barrels of oil daily, down from 13.71 million in 2005, per the U.S. Energy Information Administration.
A push for cleaner energy is happening, but don’t expect oil to go away anytime soon. More than 80% of the world’s transportation industry still uses oil, and these transactions can potentially have a seismic impact on how much you are paying for a tank of gas.
