ExxonMobil is included in the oil and gas industry in the US. The company has a large scope of operations, which is indicated through its presence across the 6 continents. This article covers the detailed PESTLE analysis of ExxonMobil discusses the effect of environmental factors and the risks or opportunities they carry for the company.
Exxon Mobil Background and Introduction
ExxonMobil is a multinational oil and gas corporation that was formed in 1999 through the merger of Exxon and Mobil. The company is headquartered in Irving, Texas, and is one of the largest publicly traded companies in the world.
ExxonMobil has a long and rich history, dating back to 1870, when John D. Rockefeller founded Standard Oil. Over the years, Standard Oil was broken up into smaller companies, and in 1911, Exxon was formed as one of the spin-off companies. Mobil was founded in 1911 as well, as the Socony-Vacuum Oil Company.
Today, ExxonMobil is involved in all aspects of the oil and gas industry, including exploration, production, transportation, and marketing. The company operates in more than 200 countries and territories, and employs approximately 72,000 people worldwide.
ExxonMobil is also known for its research and development efforts, which have resulted in numerous technological advancements in the industry. The company has made significant investments in renewable energy and has a strong commitment to reducing its environmental impact.
ExxonMobil Information
| mpany Name | ExxonMobil Corporation |
|---|---|
| Industry | Oil and gas |
| Founded | 1999 (through merger of Exxon and Mobil) |
| Headquarters | Irving, Texas, United States |
| CEO | Darren W. Woods |
| Employees | Approximately 72,000 worldwide |
| Revenue (2021) | $267.5 billion USD |
| Net Income (2021) | $25.3 billion USD |
| Operations | Exploration, production, transportation, and marketing of oil and gas products |
| Presence | Operates in more than 200 countries and territories |
| Research and Development | Invests in advanced technologies for oil and gas exploration and production, and renewable energy |
| Environmental initiatives | Committed to reducing environmental impact and developing low-carbon solutions |
PESTLE Analysis of ExxonMobil
Below is the coverage of the six PESTLE factors. Each factors has been discussed in details in order to determine its impact on the company.
Political Factors
Political factors have a strong influence on the oil and gas segment as fluctuations in political stability disrupt the operations. Exxon Mobil had to limit the workforce on site due to the conflict in Papua New Guinea which threatened the safety of the employees. Along with risk of safety, the threat of abductions slowed down operations as essential staff only was on site (Shearn, 2014).
The international entities that regulate the trading between different countries also have the potential to effect the market reach of oil and gas companies. European Union had put trading restrictions due to its invasion of Ukraine. The initiation of war on Ukraine has finally culminated in cessation of trade relations of the company with Russia.
In addition to the political climate, government’s permit, licensing and access limitations are likely to effect the operations of Exxon Mobil. The company needs to have the relevant licenses and permission for engaging in off-shore drilling processes. Furthermore, decisions pertaining to FDI, taxation and royalty are also relevant for the development of oil and gas companies (Exxon Mobil Corporation, 2022).
Economic Factors
Recession being one of the significant economic forces has a negative effect on the sales and revenues generated by an organization. The oil and gas based firms are no exception as slower economic activities result in less demand for fuel, which ultimately leads to lower revenue. Low cash balance makes Exxon Mobil more vulnerable to the negative impact of economic downturn.
Exchange rate is another important economic factor which is connected to the price structure of crude oil and the other oil based products. Since the prices have experienced a great deal of fluctuation over the years, these frequent changes effect the profit margin and demand of oil and related products.
Moreover, exchange rates have a significant impact on the sales attained by the company as it has operations across the globe. Volatile exchange rates carry financial implications, and the company had to deal with a $ 1.1 billion decline in its annual earnings in 2022 (Exxon Mobil, 2022). The changes in interest rate also constitute a notable economic factor for the company.
Social Factors:
Population growth is linked with a higher demand due to increasing consumption of oil and gas products. From 2021 to 2022, there has been an increase of 2 billion of global population, which shows favorable demographic factors for Exxon Mobil. Specifically, the developing regions of the world are at the center of the demand growth in the coming years (Exxon Mobil Corporation, 2022).
The pandemic is another critical social factor that had significantly changed the travel segment which relies on the use of oil and gas. The shift in demand for fuel due to social distancing has resulted in lower sales and a net loss of $20.2 billion. The management was considering layoff of 15% of the workforce to tackle the effect of lower demand and subsequent losses during COVID.
Technological Factors
The oil and gas sector heavily relies on the use of technology for the purpose of extraction, processing and even supplying of the product to the consumer. Exxon Mobil is using technologically advanced tools that provide it with seismic data, along with the use of analytical tools that assist the management in making exploration related decisions for the site.
Artificial Intelligence has expanded the availability of technology to the industry and the company is relying on AI to carry out the on-site operations. One reflection of inclusion of this technology is the use of autonomous drilling which helps it in maintaining efficient drilling operations in Guyana (Exxon Mobil, 2023).
Hydraulic fracturing is another way technology is helping the company in carrying out its operations effectively. This technology enables the workers to access oil reserves that are difficult to reach through the use of traditional tools. The availability of these different tools is connected to the availability of advanced technology and innovation in the US.
Legal Factors
Compliance with the health and safety laws is critical for oil and gas segment. The company is using Operations Integrity Management System to ensure that its operations are in accordance to the health and safety standards of the industry. The system enables the management to lower the risk of spills and any accidents occurring at the site (Exxon Mobil Corporation, 2022).
The company also needs to be aware of the changes occurring in the legal requirements related to compliance standards. Exxon Mobil has been a target of legal issues due to lack of transparency about the harm it has been causing to the environment through its fossil fuel operations. The management has not provided accurate information in this regard, leading to legal trial (McGreal, 2022).
Another important part of legal factors is the employment laws. Exxon Mobil follows the employment practices that are aligned with the labor policies of the US government. In addition, the employment laws that are relevant for the other countries are followed by the management.
Environmental Factors
The concern about the environmental implications of coal based energy sources has fueled the shift towards more eco-friendly energy sources. Exxon Mobil can gain benefit from this trend as the company is producing oil and gas, which is likely to be 50% higher in demand by 2050 (Exxon Mobil Corporation, 2022).
The management is investing in the development of sustainability solutions that can help in lowering the carbon emissions, reducing wastage and improved management of water resources. One initiative is advanced recycling unit for handling plastic waste. Furthermore, American Petroleum Institute’s guidelines serve as a basis of company’s eco-friendly initiatives.
Conclusion
Exxon Mobil is significantly affected by the various factors from the external environment, ranging from political stability to environmental guidelines. The company needs to keep track of the changes occurring in its environment and respond to these changes accordingly to remain profitable.
References
- Exxon Mobil (2022). ExxonMobil announces second-quarter 2022 results. Retrieved from: https://corporate.exxonmobil.com/news/newsroom/news-releases/2022/0729_exxonmobil-announces-second-quarter-2022-results
- Exxon Mobil (2023). Energy Technologies. Retrieved from: https://corporate.exxonmobil.com/operations/energy-technologies
- Exxon Mobil Corporation (2022). FORM 10-K. Retrieved from: https://corporate.exxonmobil.com/-/media/Global/Files/investor-relations/investor-relations-publications-archive/ExxonMobil-2022-Form-10-K.pdf
- McGreal, C. (2022). Exxon must go to trial over alleged climate crimes, court rules. The Guardian. Retrieved from: https://www.theguardian.com/environment/2022/may/24/exxon-trial-climate-crimes-fossil-fuels-global-heating
- Shearn, I. T. (2014). ExxonMobil’s New Guinea Nightmare. The Nation. Retrieved from: https://www.thenation.com/article/archive/exxonmobils-new-guinea-nightmare/