Exxon: Juggernaut or Dinosaur?

Cautious, rigid, and uninterested in alternative fuels, the wildly successful oil behemoth is lumbering ponderously into the future

Like the ever-expanding universe, ExxonMobil (XOM) seems to know no bounds. Its $45 billion profit in 2008 was the biggest haul recorded by a public company in the history of the world. The runner up? Exxon, in 2007. No. 3? Exxon, in 2006.

Plunging oil prices are sure to devour some of those earnings this year. But even that presents opportunity, for Exxon, long the unchallenged exemplar of Big Oil, has an enormous stockpile of cash and shares with which to buy rivals. Indeed, it’s difficult to imagine a scenario in which the company would soon be knocked from its perch. Even in the sharp recession, Exxon shares have held up, falling just 15% last year compared with a 22% decline by its rivals and 38% for the Standard & Poor’s 500-stock index. “If one oil company is left standing, it will be Exxon,” says Fadel Gheit, a long-time industry analyst for Oppenheimer & Co.


Yet despite its seeming invincibility, Exxon is surprisingly vulnerable. Interviews with industry analysts, consultants, and current and former employees cast doubt on its strategy and growth prospects. Most immediately, Exxon’s oil reserves and production are shrinking, and it is relying on less valuable natural gas to replenish them. Worse, it is getting much of that gas from a single country