Publications: Notes at the Margin

Exxon/Pioneer Merger: Big Trouble for OPEC+ (October 9, 2023)

 

Initially, in this Notes at the Margin, we intended to focus on meme investors. A New York Times op-ed by two economics professors warned those chasing stocks to stop being children and follow the adults’ advice, meaning themselves.[i] The academics will be ignored. Meanwhile, oil, while not the subject of their opinion piece, has fallen victim to the whims of meme investors.

 

Our lead meme investor story got bumped by news of ExxonMobil’s plan to acquire Pioneer Natural Resources. The merger, if approved, would strip oil-exporting countries of significant market power because ExxonMobil, unlike the independent oil producers here who grovel to OPEC+ ministers, makes decisions based solely on costs and prices.[1]

 

After we discuss the potential merger’s implications, we turn to the meme investors’ departure from the oil market and the subsequent price drop, adding that Russia's decision to resume diesel exports has increased downward pressure on crude prices.


[1] As we noted in our October 2 Notes, US gasoline prices are $1 per gallon or thirty-three percent higher today than in 2007, when crude topped $90 per barrel for the first time, while gasoline prices in Europe are $0.35 per gallon less. We credit the latter benefit to competent competition regulation in Europe and the higher US prices to incompetent or oblivious US regulators.


[i] Owen A. Lamont and Richard H. Thaler, “‘Dumb Money’ Exposes the Baffling Allure of Bad Investment Advice,” The New York Times, October 1, 2023 [https://tinyurl.com/55vfdayz].

 

 

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