An ExxonMobil station in Seattle. ExxonMobil recently fell out of the Standard & Poor’s 500 list of America’s 10 most valuable companies, slippage that reflects broader problems in the oil industry. (Chona Kasinger/Bloomberg News)

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.

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 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.

“It’s startling,” said John Kilduff of Again Capital. “Keep in mind, Exxon is both Exxon and Mobil. I can remember being at my trading desk a few years ago when NBC wanted to film our reaction when Exxon posted one of the biggest earnings ever for a quarter. Things have changed.”

The energy sector accounted for more than 20 percent of the S&P 500’s total value in the 1970s. Its share is now 4.44 percent.


Although some institutions have sworn off investments in fossil fuels, many pension funds, nonprofit organizations, universities and nations depend on the trillions generated from oil sales.

Oil stocks pay some of the richest dividend yields of any industry. Exxon pays a 5 percent dividend. Chevron pays 4 percent. France’s Total pays around 6 percent. BP and Royal Dutch Shell pay around 7 percent. (I own shares of Chevron and BP.) 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.”

Oil’s demand is not declining. What is declining is the growth in demand. For the moment, several factors are working against it.

Environmentalists, politicians and many private citizens want to put Big Oil and other fossil fuel 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.

Another factor is low prices. The U.S. energy industry is so good at finding and extracting oil that it is producing record amounts, driving down prices and company profits. The abundance has been good for U.S. drivers, who saw the lowest Labor Day gas prices in three years.

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.

“We have gone from one end of the spectrum to the other,” Flynn said.

Bankruptcy is widespread among smaller companies because of depressed prices. Crude is selling in the mid-$50s range per barrel, which isn’t terrible, but it’s not the $70 that most foreign producers consider optimal.

Twenty-eight oil and gas producers have filed for bankruptcy in 2019, according to a report by the Haynes and Boone law firm. That number matches all the bankruptcies for 2018.

“The producers were borrowing money when oil was $100 a barrel, but now they have to repay that borrowed money with $50-per-barrel oil prices,” said Buddy Clark, who runs the energy practice at Haynes and Boone and wrote a book on oil company financing. “A number of these companies were put on the gurney in the emergency room and waited for a transplant, but none has shown up.”

Exxon, Chevron and other supermajor oil companies are expected to snap up the independent producers and bring order to the shale oil patch, where many of the bankruptcies have occurred. That would be similar to how John D. Rockefeller brought efficiency to the sector when he nearly monopolized it more than a century ago.

Trade disputes, sanctions against Iran and Venezuela’s internal meltdown have contributed to confusion in oil markets. The world produces and consumes a record 100 million barrels of oil a day. Deviation on either side can send oil prices spiraling up or plunging down. Right now, supply and demand are pretty much in balance — even though a perception exists that the world is awash in oil.

Saudi Arabia has been the industry’s great stabilizer, with $10 trillion worth of oil under its sands. But the kingdom and other members of the Organization of the Petroleum Exporting Countries have been unable to limit production enough to keep prices within the sweet spot of $70 to $80 a barrel.

The Saudis recently fired their oil minister amid preparations to sell shares in the national oil company, Saudi Aramco, on public stock markets.

All these factors have conspired to drive oil stock prices downward.

“Energy is under-loved, under-owned,” said Pavel Molchanov, energy analyst at Raymond James.

President Trump’s trade war with China has also hurt prices, because it has slowed economies around the world that depend on uninterrupted trade. Producers cannot reduce output fast enough to keep up with the easing growth in demand.

Kilduff said more than 80 percent 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 as the market is ascribing to these companies. There may be some complacency.”

He added: “You could argue that we are at one of the Warren Buffett moments when he said, ‘Be fearful when others are greedy and greedy when others are fearful,’ ”