A decade ago, both were among the most valuable companies in the world. In 2008, Exxon was the largest company listed on a US exchange with a market cap of over $700 billion. Now, many companies have lapped them. Among U.S. stocks, Exxon is ranked 29th with a $236 billion market cap, while Chevron is 40th with a $200 billion market cap.
Energy Bear Market
Of course, the major factor has been the bear market in energy prices over the last decade which caused oil prices to plummet from above $150 in the spring of 2008 to negative prices in the front-month contract in the spring of 2020. The previous bull market in energy led to massive investments in production and new innovations which led to tough conditions for US oil companies, specifically due to plentiful oil in North America.
At the same time, the profitability and growth of tech companies exceeded everyone's expectations, and this sector now accounts for the biggest companies with three companies sporting market caps above $1 trillion.
The weightage of energy stocks in the S&P 500
That a merger was being considered between the two biggest oil companies is also another indication of the sector's bearish conditions.
However, there are some reasons to believe that the situation is improving. Oil has posted a strong rebound from its lows, due to energy demand being stronger than expected. There have also been disruptions in production and distribution channels due to the coronavirus.
Also, capital expenditures in the sector have plummeted due to the bear market and beliefs of peak oil so there could be a prolonged period of rising prices as increasing oil production requires time and investment. It's also true that 100 million people globally enter the middle class which means increased energy consumption. Thus, demand will remain strong despite improvements in efficiency and increased alternative energy.
This means that oil could see another big bull market before it inevitably hits secular stagnation due to increased amounts of alternative energy production and better battery storage.