Are We Seeing the End of Big Oil?

Hugh Pickens writes "Cyrus Sanati writes in Fortune Magazine that up until now, it has been widely accepted that being bigger was better for oil companies, but the announcement that ConocoPhillips plans to break up into two separately traded companies, separating its exploration and production unit from its refining and marketing units, took Wall Street by surprise, raising uncomfortable questions about the future of Big Oil. 'That's because the exploration side and the refining side of the oil business have little to do with one another,' writes Sanati. 'Contrary to popular belief, Big Oil has almost no control over the price of oil these days. That power squarely rests with oil-rich nations that hold most of the world's oil reserves and the Wall Street banks and hedge funds that speculate and make markets in the oil trading game. So even though ExxonMobil pumps oil, it can't guarantee that its refining unit will be able to profitably process a barrel into gasoline or heating oil.' ... 'If the ConocoPhillips story is a success for shareholders, there will be calls to break up Big Oil just in time for the annual meetings in the spring. So by this time next year, it is possible that Big Oil will go the way of Rockefeller's once gargantuan Standard Oil — with the markets, not the government, forcing a break up this time.'"

Comments

Re:Markets?!?

[roman_mir]

No, the market is providing a solution, which makes sense. Governments do not do this. By the time Standard Oil was broken up it wasn't a monopoly. There are no monopolies in free market anyway, there is no such thing as a natural monopoly. It's a ruse by the government and gov't hired charlatans that people think are economists to justify gov't interference with the market.

Whenever gov't participates in any sort of 'breaking of a monopoly', you know it's lobbied by other businesses who cannot effectively compete on price and/or quality against a company that provides the solution that market prefers at that point in time.