Apple is now worth more than the combined value of the oil and gas majors

On fire.
On fire.
Image: REUTERS/U.S. Coast Guard/Handout
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The oil and gas sector, once worth a combined $3 trillion, is now worth less than Apple’s $1.5 trillion market capitalization. If it wanted, the Cupertino, California technology company could purchase the world’s most expensive private oil and gas firm, ExxonMobil, for $198 billion with cash to spare. 

That’s quite a reversal of fortunes. For years, the oil and gas industry delivered consistent returns to Wall Street. Its lucrative dividends, around 6% at leading firms, gave investors a reason stick with the stocks despite a darkening outlook and the looming threat of climate policies. With oil hovering around $60 per barrel, nothing seemed to phase investors.

But in 2016, fracking opened up the taps on cheap US shale oil. Then the coronavirus pandemic crushed demand just as a price war between Russia and Saudia Arabia flooded the world with cheap oil. That drove the price of benchmark crude, briefly, into negative territory, and it now hovers at about $40 per barrel, where it seems destined to stick.

With oil prices now far below what many non-state-owned oil firms need to make a profit, massive job losses have struck the US industry (85,00 this year) as production is curtailed. Royal Dutch Shell slashed its dividend by two-thirds, the first time in 80 years. 

The oil and gas sector has now underperformed the S&P 500 market index for years. It lags behind performance of renewables, too. While the decline began in 2015, the last year has seen oil and gas stocks drop by 35% just as shares in major renewable firms have risen by the same percentage.

Oil and gas are now in uncharted territory. ”The pace and scale of the societal impact of Covid-19 and the resulting deterioration in the macroeconomic and commodity price outlook is unprecedented,” Shell told investors, predicting the effects would likely extend beyond 2020. “Shell is taking the steps necessary to ensure that we are well-positioned for the eventual economic recovery.”

It’s unclear if that recovery will include fossil fuels.