Market Structure of Exxon Mobil

Exxon Mobil Corporation declared its 2009 first quarter results which were quite depressing if compared to the same quarter last year. Exxon’s earnings for the first quarter of 2009 went down by 58 % while EPS (Earning per share) nosedived by 54% Quarter on quarter compared to first quarter of Year 2008. Exxon Mobil is a petroleum company which has an oligopolistic market structure and which also happens to be world’s largest publicly traded company.

Oligopolostic market structure is one in which the gamble of market dominance is played between a few players who through their business strategies try to obtain as much share from the market as possible , by weaning away the consumers from other companies . Sometimes these companies may collude with each other to dictate the supplies, thereby causing a major shift in market prices. More than 50% of the world’s largest companies are oil companies. Impact of new companies entering in Oil sector

As per the recent ranking study of oil companies of the world by Petroleum Intelligence Weekly [1], the top slots is taken by Saudi Arabian State oil company while Exxon Mobil is at 3rd position after Iran’s state oil company. Venezuelan and Chinese state owned oil companies were at 4th and 5th position respectively. This ranking clearly underscores that State support is must for any enhancement in the net worth. May be this is the reason that the latest entrants into the top 50 list of PIW [1] Uzbekneftegas, China’s CNOOC and Kazmunaigas of Kazakhstan — all majority state-owned. Read about E xxonMobil functional structure

The advantage with a state owned company is that they need not worry much about any exploration decisions or loss in revenue as State government is backing them up in any such crucial decisions. Hence, it’s not difficult to understand the reason why more than 50% companies in top PIW [1] ranking are Majority state owned. The State owned petroleum companies need not compete with any other petroleum company as state provides them the secured market where other publicly held petroleum companies are not allowed to compete. Oil prices and the Share prices of Exxon Mobil

In order to remain competitive, Companies like Exxon, Chevron corporation need to continually re-invent to remain at the top position. This background helps to understand why Exxon Mobil is still differentiating from its competitors, by going for spending spree in oil exploration [2] when the oil price is hovering somewhere around $40. The same strategy is being adopted by Chevron Corporation. Though, this does not seem to be a trend as some companies like BP ; Concophilips have mentioned that the oil prices need to increase so that they can fund any capital spending. Read about E xxonMobil functional structure

Nevertheless, shares of Exxon Mobil increased by 2. 7% during middle of May 09 after their announcement of oil exploration. The fall in oil prices lead to deferment of Oil Company’s capital spending projects or may also result in mergers of oil companies as well as this also induces energy companies to restructure their existing business practices . Some companies may also choose to raise money from market as in case of Santos ,Australia’s third largest oil and gas producer which recently announced that it was in pursuit to raise up to $3 billion through a deeply discounted rights offer.

The other example in this case would be Woodside Petroleum that announced a new synidicated loan facility of $US1. 1 billion ($A1. 41 billion) earlier this week. Hence as can be seen from above oil price analysis in recent markets ,that oil companies need to equip themselves with best strategies to meet challenges of dynamic oil market that daily touches new crests and toughs due to fluctuations in oil supplies demands and prices.

Bibliography

1. EXXON MOBIL CORPORATION ANNOUNCES ESTIMATED FIRST QUARTER 2009 RESULTS.(2009). Retrieved May 19, 2009, from 1. http://www. exxonmobil. com/Corporate/Files/news_release_earnings1q09. pdf

2. Petroleum Intelligence Weekly Ranks World’s Top 50 Oil Companies (2009). (n. d. ). Retrieved May 23, 2009, from http://www. energyintel. com/DocumentDetail. asp? document_id=245527

3.. ExxonMobil veers from its competitors in its capital spending. (2009, March 09). Retrieved May 23, 2009, from http://www. bloggingstocks. com/2009/03/10/exxonmobil-veers-from-its-competitors-in-its-capital-spending