The Atlanta Journal-Constitution
Exxon slides off S&P top 10 list
Hardly anyone heard the recent thunderclap in the stock market. For the first time in nearly a century, the oil giant that is now ExxonMobil fell out of the Standard & Poor’s 500 list of America’s 10 most valuable companies.
The situation
Exxon, the largest private petroleum company in the world, has been one of the S&P’s top companies since 1925. It was known as Standard Oil of New Jersey back then.
Though it is worth nearly $300 billion, Exxon’s fall to 11th place in September’s index reflects oil’s broader decline — from a driver of industrial civilization to a besieged industry fighting for relevance. It joins diminished industries such as steel, railroads and automobiles.
The energy sector accounted for more than 20% of the S&P 500’s total value in the 1970s. Its share is now 4.44%.
What it means
Although some institutions have sworn off investments in fossil fuels, many pension funds, nonprofits, universities and nations depend on the trillions generated from oil sales.
Oil stocks pay some of the richest dividends of any industry. Exxon pays a 5% dividend. Chevron pays 4%. France’s Total pays around 6%. BP and Royal Dutch Shell pay around 7%. But the stocks are still unloved.
“Energy has taken a back seat to more techy sectors,” said Phil Flynn, senior market analyst at the Price Futures Group. “We saw the same thing in 1999 when oil companies were out of favor and the dot-coms were the new hot thing. But oil came back.”
What happens now?
Oil’s demand is not declining. What is declining is the growth in demand.
Environmentalists, politicians and many private citizens want to put Big Oil and other fossilfuel companies out of business because of concerns about greenhouse-gas pollution’s effect on the climate. While alternative energy is growing, it is still a relatively small slice of the overall world energy supply.
There is so much oil now that the fear of running out (“peak oil”) that dominated the energy conversation a decade ago has swung to a fear that there may not be enough demand to keep the industry healthy.
John Kilduff of Again Capital said more than 80% of crude oil is used for transportation. While Teslas and other electric cars are getting loads of attention, he said, “everything else still runs on diesel and gasoline.”
“The argument is that the industry is facing oblivion,” Kilduff said. “But the outlook is far from being as gloomy.”