The rise of technology isn't the only threat to Exxon Mobil's standing in the S&P 500 Index. For the first time in a decade, the oil giant is no longer one of the two largest US firms. Google has gained in market capitalisation and is now second only to Apple. But Exxon faces its own pressures, too. Soaring capital spending and flat oil prices mean it may have to get used to even lower rankings.
Just five years ago, Exxon's market value of $380 billion made it four times larger than Apple and more than three times the size of Google. But shares in the two tech firms have since climbed at staggering annual compound rates of 40 per cent and 29 percent, respectively. Meanwhile Exxon's market cap has scarcely increased.
The company could even shrink, despite a reputation as one of the best-run oil majors. Much of the world's most accessible oil is now out of bounds, locked up by government-controlled oil companies in West Asia and Latin America. That has forced Exxon and its peers to scavenge for pricey hydrocarbons in remote areas or ocean depths. The result has been a 56 per cent surge in Exxon's capital spending over the past four years for a mere one per cent rise in oil and gas production over the same period.
This wouldn't matter so much if scarce oil were pushing up prices. Instead, innovations in shale drilling have added to the world's available supply, helping to keep prices stable. The production gains in America have been hogged by nimbler independent companies like Continental Resources, which has quadrupled in size over the past five years. If anything, investors currently seem to prefer the idea of Western majors splitting themselves up - even as giants like PetroChina muscle in on the world stage. Even Exxon's new No. 3 spot may not be set in stone. If today's biggest S&P 500 companies by market value keep growing for the next five years as they have for the past 10, Amazon will nab it. Size isn't everything, of course. But slipping down the ranking could cost Exxon geopolitical clout.
