Why Aren’t ExxonMobil and Chevron Dow Leaders?

XOM and CVX Are Trailing the Dow

The U.S. energy industry is booming, so why aren’t ExxonMobil and Chevron beating the Dow?

U.S. Energy Is Booming

ExxonMobil and Chevron are trailing the Dow even though energy production is booming in the United States.

But the Energy Boom Is Local, Not Global

The problem is that ExxonMobil and Chevron are global energy players.• Worldwide oil production is up only 4.6% over the past decade. • The U.S. energy boom is taking place in shale plays such as North Dakota’s Bakken and Texas’ Barnett and Eagle Ford.

As a Result, Smaller Companies Are Winning

As a result of the regional nature of the current energy boom in the U.S., smaller, more nimble companies are winning. • Kodiak Oil & Gas and Continental Resources have grown much more quickly because of their focus on shale instead of Big Oil’s more global approach.

Drilling For Oil Is Getting More Expensive

Another factor fighting growth and profitability is that new oil and gas fields are being found in expensive formations such as shale and under more than a mile of water.

Image sources: Kodiak Oil & Gas and ExxonMobil.

Refineries Dropping in ProfitabilityRefineries are also fighting higher oil prices.• High oil prices may be good for exploration and production, but they reduce profits in refineries, where ExxonMobil and Chevron both have exposure.• Over the past five years there’s been a trend of higher oil price,s but gasoline prices haven’t kept pace.• The result is lower refining profits.

Can the Tides Turn for Big Oil?

Are Big Oil stocks ExxonMobil and Chevron destined to be Dow laggards?

Trends Aren’t Looking Good

A few major trends are working against Big Oil.• Energy consumption in developed countries is falling, not rising.• U.S. energy production is being driven by smaller, more nimble companies. • Big oilfield opportunities are in expensive offshore or harsh climate locations.

Destined to Lag the Dow

The headwinds facing ExxonMobil and Chevron are too big to ignore. Not only is domestic production being dominated by smaller players, but alternative energies also loom on the horizon. I’m afraid these stocks are destined to lag the Dow.

There are clearly opportunities in U.S. energy if you play it right, and the good news is that the government wants you to get in on the action.

Find out how to profit in our free report.