Analysis-US would struggle to block Exxon’s politically unpopular megadeal
The White House may have blamed Exxon Mobil for high energy prices taking their toll on consumers, but experts say they would struggle to thwart the top U.S. oil producer’s contemplated $60 billion acquisition of Pioneer Natural Resources. Deal negotiations between Exxon and Pioneer are advanced but have not yet led to an agreement. The acquisition would give Exxon ownership of the largest producer in the biggest U.S. oilfield.
U.S. President Joe Biden has criticized energy companies for their surging profits as gasoline prices soared, especially targeting Exxon for not raising production despite its record earnings. The White House wrote to Federal Trade Commission (FTC) chair Lina Khan in 2021 asking her to scrutinize deals in the sector for “anti-consumer behavior,” but the FTC would face challenges in challenging Exxon’s attempted acquisition of Pioneer.
Oil and gas companies argue that U.S. mergers alone cannot stifle competition, as commodity prices are dictated by supply and demand forces in a vast global market. This makes oil and gas deals involving production and exploration, like the one between Exxon and Pioneer, easier to defend under antitrust law.
While Exxon and Pioneer stand a good chance of completing their deal, they would face a long antitrust review due to the controversy it will attract. The FTC has not challenged a major merger of oil and gas producers since 2000, but the modern U.S. experience is that oil and gas deals of notable size receive close scrutiny.
The Permian basin, where the acquisition would make Exxon the biggest producer, plays a significant role in energy production. Exxon’s deal for Pioneer would consolidate the company’s position in the Permian basin, but it is less consolidation than what was allowed in another U.S. oil field when Chevron acquired PDC Energy.
Regulators will need to conduct a thorough analysis of Exxon’s deal for Pioneer, considering the Permian basin’s importance in energy production.
Overall, while the White House may have concerns about Exxon’s megadeal, legal experts suggest that blocking the acquisition would be challenging due to the nature of the oil and gas industry and the global market forces that dictate commodity prices.
