The oil company, ExxonMobil has been notably sceptical about the commercial prospects for renewable energy production. Instead, its focus seems to be to secure an increasingly dominant position in oil and gas. Why might ExxonMobil have adopted this strategy? Is it in the interests of its shareholders in (a) the medium term and (b) long-term?

Question

What will be an ideal response?

Answer 1

Recent rises in crude oil prices are an obvious reply to the first question, whilst the sceptic might
argue that footloose, capitalist shareholders do not have long term interests. As regards the short and
medium term, Exxon’s priorities remain clear and rational: pursue effective operations and maintain
profitability, although it may need to become more active and effective in prospecting for new oil
deposits. From a longer term perspective, oil and gas are clearly finite, albeit substantial raw
materials for which substitutes have so far been only a partial answer. Enterprises with a strong position in these sectors have a clear logic for trying to enhance their positions further at the expense
of weaker competitors. ExxonMobil may be wary of diversification into capital-intensive sectors,
especially wind and nuclear power, where it considers it has no distinctive capabilities or resources.
Why has apparently rejected into Of course, future integration with enterprises engaged in other
forms of energy production remains a long term diversification option. So its strategy can be seen as
defensive, ‘wait and see.’ Indeed, industry leaders often prefer to let smaller competitors make the
first move and follow if and when it looks viable and necessary.