When ExxonMobil dropped $60 billion on Pioneer and Chevron followed with $53 billion for Hess, the business press celebrated these as “strategic” moves. But if you look through Michael Porter’s lens, these mega-mergers represent something else entirely: textbook examples of companies avoiding the hard choices that real strategy demands. Porter would call this “straddling” - attempting to serve multiple strategic positions simultaneously rather than making the trade-offs necessary for sustainable competitive advantage. And it’s exactly what’s happening in oil and gas right now.

What These Deals Actually Reveal

Let’s examine what these companies actually said they were buying: ExxonMobil’s justification: “Transforms ExxonMobil’s upstream portfolio, more than doubling the company’s Permian footprint and creating an industry-leading, high-quality, high-return undeveloped U.S. unconventional inventory position” Chevron’s rationale: “The acquisition of Hess upgrades and diversifies Chevron’s already advantaged portfolio. The Stabroek block in Guyana is an extraordinary asset with industry leading cash margins and low carbon intensity” Notice the pattern? Both companies are essentially saying “we want to be bigger and have more of everything.” That’s not strategic positioning - that’s operational scale-seeking disguised as strategy.

The Straddling Problem

Porter defines straddling as trying to match the benefits of a successful strategic position while maintaining your existing position. You’re attempting to serve multiple positions at once instead of making the fundamental trade-offs that create defensible competitive advantage. Here’s what’s actually happening with these deals:

The Numbers Tell a Different Story

Here’s what makes this particularly problematic: ExxonMobil’s U.S. upstream segment “has spent $38 billion on capital projects over the past five years, while recording an overall earnings loss over the period”. This makes it “by far the worst performer in the company’s portfolio, and the company’s only segment that has lost money over the past five years.” So ExxonMobil’s response to poor performance in U.S. upstream? Double down with a $60 billion acquisition to get more of the same. Pioneer’s stock “has trailed the market over the last decade, increasing just 17%—vs. a 148% increase in the S&P 500”. The market’s reaction was telling: “ExxonMobil’s stock price is down more than 10 points since the beginning of last week—meaning that the company’s market capitalization has fallen by more than $40 billion since rumors of a Pioneer acquisition started to circulate”.

What Real Strategic Focus Would Look Like

Porter argues that successful strategic positioning requires three elements: unique positioning, clear trade-offs, and tight fit between activities. Real strategic alternatives for these companies might have looked like: Geographic Focus: Instead of trying to be dominant everywhere, pick 2-3 basins and become the undisputed cost and technology leader there. Sell everything else. Technology Focus: Choose whether to be the leader in conventional resources OR unconventional development. Not both. Customer Focus: Serve either high-volume, price-sensitive customers OR premium customers willing to pay for lower-carbon production. Make the trade-offs that choice requires.

The AI Parallel

This same straddling pattern is playing out in AI adoption across industries. Companies are implementing AI for “predictive maintenance,” “supply chain optimization,” “customer service,” and “data analytics” - essentially trying to use AI everywhere rather than making strategic choices about where it creates unique competitive advantage. The oil and gas industry’s focus on using AI to “optimize operations” and “enhance decision-making” mirrors exactly what every other industry is doing. It’s operational effectiveness, not strategic differentiation.

Why Straddling Feels Strategic (But Isn’t)

The appeal of these mega-mergers is obvious. In an uncertain environment, diversification feels safer than focus. Having more assets provides more options. Scale creates negotiating power. But Porter’s insight is that this apparent safety is an illusion. The FTC’s concern that Pioneer CEO Scott Sheffield “could be involved in ‘collusive activity that would potentially raise crude oil prices’” reveals the real game here - these aren’t moves to create unique value, they’re moves to gain market power through size. When companies avoid making hard strategic choices, they end up making no choices at all. They become, in Porter’s words, “stuck in the middle” - not particularly good at anything specific, just bigger.

The Real Cost of Avoiding Trade-offs

Chevron expects “$1 billion in run-rate cost synergies” from the Hess deal and ExxonMobil talks about “double-digit returns by recovering more resource, more efficiently”. These are operational improvements, not strategic advantages. Meanwhile, the regulatory complications tell the real story. The Chevron-Hess deal faces arbitration over Exxon’s “right of first refusal for Hess’s stake in the Stabroek block” that could extend into 2025. The FTC required that Pioneer CEO Sheffield “could not hold a board position” to approve the ExxonMobil deal. These aren’t the problems you face when you’re creating unique strategic value. These are the problems you face when you’re just trying to get bigger in ways that everyone recognizes as industry consolidation, not strategic innovation.

The Porter Prescription

Porter would argue these companies should be asking fundamentally different questions:

Instead, they’re asking: How can we get bigger without making any fundamental changes to how we compete? That’s not strategy. That’s just scale-seeking. And in Porter’s framework, it’s precisely the kind of thinking that leads to “mutually destructive competition” where everyone ends up worse off. The $113 billion question is whether these companies are building sustainable competitive advantages or just creating bigger versions of the same strategic problems they already had.