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The Oil Industry in U.S. Yanming Zhang Apr 27, 2009 Microeconomics presentation
Description • The oil (petroleum) industry includes the global processes of exploration, extraction, refining, transporting, and marketing oil products. • Fuel oil (for example, diesel) and gasoline are the major products of this industry.
The Black Gold • A barrel (42 gallons) of oil makes about 19.5 gallons of gasoline, 9 gallons of fuel oil, 4 gallons of jet fuel, and 11 gallons of other products. • Petroleum is also the raw material including pharmaceuticals, solvents, lubricants, kerosene, fertilizers, pesticides, and plastics.
History(1) • • • •
5000BC Water-proof roof, road 1500BC Fuel for lighting 1800’s, Western Pennsylvania-- Oil Creek 1850's, the Pennsylvania Rock Oil Co. (led by the invention of the kerosene lamp ) • 1870, Standard Oil Company founded in Cleveland, Ohio by John D. Rockefeller
History (2) • Between 1875 and 1878, Rockefeller acquires control of 80% of the total US refining capacity through alliances with other refiners. • In 1881, Standard Oil Trust is formed, combining the interests of 40 companies under a single board of trustees. • Monopoly
January 1, 1886 Standard Oil Marketing Map Exxon BP acquired 1978 Mobil Conoco ARCO
The Break Up • 1890 July 2, Sherman Antitrust Act “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” • 1906, US government files law suit against Standard Oil with Sherman Antitrust Act. • 1911, the US Supreme Court orders Standard Oil Trust to break up.
• Standard Oil was dissolved into 35 companies • Standard Oil of New Jersey later became Esso, then Exxon (named in 1972), Standard Oil of New York became Mobil, and Standard Oil of California (Socal) is now Chevron.
Exxon Chevron BP acquired 1978 Amoco
ARCO
The Seven Sisters • • • • • • •
SO of New Jersey— Exxon (named in 1972) SO of New York – Mobil S Oil of California (Socal) – Chevron. Royal Dutch Shell (1907) Texaco (1901) Gulf (1890, acquired by Chevron in 1984) British Petroleum (BP) (previously Anglo-Persian Oil Company, third largest global energy company, 1909)
ARCO • Atlantic Petroleum Storage Company (1866) • it became part of the SO Trust in 1874, but achieved independence in 1911’s broke up. • It was the basis of ARCO, which was the merger of East Coast-based Atlantic Refining and California-based Richfield Petroleum in 1966. • In 1969, ARCO acquired Sinclair, but later divested certain Sinclair assets during the mid 1970s, resulting in Sinclair returning as a private company.
Current Market-Oligopoly • Five companies control 62% of the US retail gasoline market: • ExxonMobil, BP, ChevronTexaco, Royal Dutch Shell, and ConocoPhillips. They also control 50% of the refinery capacity in the US, and 48% of the oil production.
Concentration Ratio • Measuring the percentage of market shares by the largest N(e.g. 4 or 5) firms in the industry • monopoly— near-100% • oligopoly— 40-60% • monopolistic competition—less than 40% • perfect competition 1-10%. • A small number of producers of similar size. The oil product and its derivatives are homogeneous products throughout the world.
Recent Mergers • 1997 Ashland Oil combines most assets with Marathon Oil • 1998 British Petroleum (BP) acquires Amoco • 1998 Pennzoil merges with Quaker State Oil • 1999 Exxon and Mobil join to form ExxonMobil • 1999 British Petroleum (BP) Amoco acquires ARCO (Atlantic Richfield), became the second largest private oil company, next to ExxonMobil • 2001 Chevron acquires Texaco to form ChevronTexaco, Philips acquires Tosco • 2002 Conoco merges with Phillips to form ConocoPhillips • 2002 Royal Dutch Shell acquires Pennzoil-Quaker State
Saudi Arabian Oil Co.*
WORLDWIDE OIL PRODUCTION Million barrels per year, 1998 3028
Petroleos Mexicanos*
1278
Petroleos de Venezuela*
1258
China National Petroleum*
1168
BP Amoco + Arco
963
Exxon-Mobil
894
Royal Dutch/Shell
859
Nigerian National Oil Co.*
772
Iraq National Oil Co.*
770
Kuwait Petroleum*
757
Chevron + Texaco
756
COMPANY
Rank
2008 Company
Revenues Profits ($ millions) ($ millions)
1
Wal-Mart Stores
378,799.0
12,731.0
2
Exxon Mobil
372,824.0
40,610.0
3
Chevron
210,783.0
18,688.0
4
General Motors
182,347.0
-38,732.0
5
ConocoPhillips
178,558.0
11,891.0
6
General Electric
176,656.0
22,208.0
7
Ford Motor
172,468.0
-2,723.0
8
Citigroup
159,229.0
3,617.0
9
Bank of America Corp.
119,190.0
14,982.0
10
AT&T
118,928.0
11,951.0
11
Berkshire Hathaway
118,245.0
13,213.0
12
J.P. Morgan Chase & Co.
116,353.0
15,365.0
13
American International Group
110,064.0
6,200.0
14
Hewlett-Packard
104,286.0
7,264.0
15
International Business Machines 98,786.0
10,418.0
16
Valero Energy
96,758.0
5,234.0
17
Verizon Communications
93,775.0
5,521.0
Rank
Forbes 2009 Company
Revenues Profits ($ millions) ($ millions)
1
Exxon Mobil
442,851.0
45,220.0
2
Wal-Mart Stores
405,607.0
13,400.0
3
Chevron
263,159.0
23,931.0
4
ConocoPhillips
230,764.0
-16,998.0
5
General Electric
183,207.0
17,410.0
6
General Motors
148,979.0
-30,860.0
7
Ford Motor
146,277.0
-14,672.0
8
AT&T
124,028.0
12,867.0
9
Hewlett-Packard
118,364.0
8,329.0
10
Valero Energy
118,298.0
-1,131.0
11
Bank of America Corp.
113,106.0
4,008.0
12
Citigroup
112,372.0
-27,684.0
13
Berkshire Hathaway
107,786.0
4,994.0
14
International Business Machines 103,630.0
12,334.0
15
McKesson
101,703.0
990.0
16
J.P. Morgan Chase & Co.
101,491.0
5,605.0
17
Verizon Communications
97,354.0
6,428.0
Largest US oil producers, 2004 thousand barrels per day BP
827
Chevron Texaco
493
Shell
413
ConocoPhillips
322
Occidental
261
Aera Energy
216
ExxonMobil
213
Kerr-McGee
152
Apache
95
Anadarko 88 These top 10 companies represent 56% of total US oil production.
Largest US natural gas producers, 2004 million cubic feet per day BP
4252
ExxonMobil
2513
Devon Energy
2244
ChevronTexaco
2128
ConocoPhillips
2110
Burlington Resources acquired by ConocoPhillips, 2005-06
1928
Shell
1894
Anadarko
1628
Kerr-McGee
1459
Chesapeake Operating
1368
These top 10 companies represent 39% of total US natural gas production.
16% 28%
56%
Description • The oil (petroleum) industry includes the global processes of exploration, extraction, refining, transporting, and marketing oil products. • Fuel oil (for example, diesel) and gasoline are the major products of this industry.
The Black Gold • A barrel (42 gallons) of oil makes about 19.5 gallons of gasoline, 9 gallons of fuel oil, 4 gallons of jet fuel, and 11 gallons of other products. • Petroleum is also the raw material including pharmaceuticals, solvents, lubricants, kerosene, fertilizers, pesticides, and plastics.
History(1) • • • •
5000BC Water-proof roof, road 1500BC Fuel for lighting 1800’s, Western Pennsylvania-- Oil Creek 1850's, the Pennsylvania Rock Oil Co. (led by the invention of the kerosene lamp ) • 1870, Standard Oil Company founded in Cleveland, Ohio by John D. Rockefeller
History (2) • Between 1875 and 1878, Rockefeller acquires control of 80% of the total US refining capacity through alliances with other refiners. • In 1881, Standard Oil Trust is formed, combining the interests of 40 companies under a single board of trustees. • Monopoly
January 1, 1886 Standard Oil Marketing Map Exxon BP acquired 1978 Mobil Conoco ARCO
The Break Up • 1890 July 2, Sherman Antitrust Act “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” • 1906, US government files law suit against Standard Oil with Sherman Antitrust Act. • 1911, the US Supreme Court orders Standard Oil Trust to break up.
• Standard Oil was dissolved into 35 companies • Standard Oil of New Jersey later became Esso, then Exxon (named in 1972), Standard Oil of New York became Mobil, and Standard Oil of California (Socal) is now Chevron.
Exxon Chevron BP acquired 1978 Amoco
ARCO
The Seven Sisters • • • • • • •
SO of New Jersey— Exxon (named in 1972) SO of New York – Mobil S Oil of California (Socal) – Chevron. Royal Dutch Shell (1907) Texaco (1901) Gulf (1890, acquired by Chevron in 1984) British Petroleum (BP) (previously Anglo-Persian Oil Company, third largest global energy company, 1909)
ARCO • Atlantic Petroleum Storage Company (1866) • it became part of the SO Trust in 1874, but achieved independence in 1911’s broke up. • It was the basis of ARCO, which was the merger of East Coast-based Atlantic Refining and California-based Richfield Petroleum in 1966. • In 1969, ARCO acquired Sinclair, but later divested certain Sinclair assets during the mid 1970s, resulting in Sinclair returning as a private company.
Current Market-Oligopoly • Five companies control 62% of the US retail gasoline market: • ExxonMobil, BP, ChevronTexaco, Royal Dutch Shell, and ConocoPhillips. They also control 50% of the refinery capacity in the US, and 48% of the oil production.
Concentration Ratio • Measuring the percentage of market shares by the largest N(e.g. 4 or 5) firms in the industry • monopoly— near-100% • oligopoly— 40-60% • monopolistic competition—less than 40% • perfect competition 1-10%. • A small number of producers of similar size. The oil product and its derivatives are homogeneous products throughout the world.
Recent Mergers • 1997 Ashland Oil combines most assets with Marathon Oil • 1998 British Petroleum (BP) acquires Amoco • 1998 Pennzoil merges with Quaker State Oil • 1999 Exxon and Mobil join to form ExxonMobil • 1999 British Petroleum (BP) Amoco acquires ARCO (Atlantic Richfield), became the second largest private oil company, next to ExxonMobil • 2001 Chevron acquires Texaco to form ChevronTexaco, Philips acquires Tosco • 2002 Conoco merges with Phillips to form ConocoPhillips • 2002 Royal Dutch Shell acquires Pennzoil-Quaker State
Saudi Arabian Oil Co.*
WORLDWIDE OIL PRODUCTION Million barrels per year, 1998 3028
Petroleos Mexicanos*
1278
Petroleos de Venezuela*
1258
China National Petroleum*
1168
BP Amoco + Arco
963
Exxon-Mobil
894
Royal Dutch/Shell
859
Nigerian National Oil Co.*
772
Iraq National Oil Co.*
770
Kuwait Petroleum*
757
Chevron + Texaco
756
COMPANY
Rank
2008 Company
Revenues Profits ($ millions) ($ millions)
1
Wal-Mart Stores
378,799.0
12,731.0
2
Exxon Mobil
372,824.0
40,610.0
3
Chevron
210,783.0
18,688.0
4
General Motors
182,347.0
-38,732.0
5
ConocoPhillips
178,558.0
11,891.0
6
General Electric
176,656.0
22,208.0
7
Ford Motor
172,468.0
-2,723.0
8
Citigroup
159,229.0
3,617.0
9
Bank of America Corp.
119,190.0
14,982.0
10
AT&T
118,928.0
11,951.0
11
Berkshire Hathaway
118,245.0
13,213.0
12
J.P. Morgan Chase & Co.
116,353.0
15,365.0
13
American International Group
110,064.0
6,200.0
14
Hewlett-Packard
104,286.0
7,264.0
15
International Business Machines 98,786.0
10,418.0
16
Valero Energy
96,758.0
5,234.0
17
Verizon Communications
93,775.0
5,521.0
Rank
Forbes 2009 Company
Revenues Profits ($ millions) ($ millions)
1
Exxon Mobil
442,851.0
45,220.0
2
Wal-Mart Stores
405,607.0
13,400.0
3
Chevron
263,159.0
23,931.0
4
ConocoPhillips
230,764.0
-16,998.0
5
General Electric
183,207.0
17,410.0
6
General Motors
148,979.0
-30,860.0
7
Ford Motor
146,277.0
-14,672.0
8
AT&T
124,028.0
12,867.0
9
Hewlett-Packard
118,364.0
8,329.0
10
Valero Energy
118,298.0
-1,131.0
11
Bank of America Corp.
113,106.0
4,008.0
12
Citigroup
112,372.0
-27,684.0
13
Berkshire Hathaway
107,786.0
4,994.0
14
International Business Machines 103,630.0
12,334.0
15
McKesson
101,703.0
990.0
16
J.P. Morgan Chase & Co.
101,491.0
5,605.0
17
Verizon Communications
97,354.0
6,428.0
Largest US oil producers, 2004 thousand barrels per day BP
827
Chevron Texaco
493
Shell
413
ConocoPhillips
322
Occidental
261
Aera Energy
216
ExxonMobil
213
Kerr-McGee
152
Apache
95
Anadarko 88 These top 10 companies represent 56% of total US oil production.
Largest US natural gas producers, 2004 million cubic feet per day BP
4252
ExxonMobil
2513
Devon Energy
2244
ChevronTexaco
2128
ConocoPhillips
2110
Burlington Resources acquired by ConocoPhillips, 2005-06
1928
Shell
1894
Anadarko
1628
Kerr-McGee
1459
Chesapeake Operating
1368
These top 10 companies represent 39% of total US natural gas production.
16% 28%
56%
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