Reports have circulated in recent days that UK petroleum giant Shell is considering a bid to take over its rival BP. Shell’s management is not offering confirmation, but investors and analysts are considering the implications of a possible marriage of two of the remaining oil majors once known as the Seven Sisters.
Such a combination would bring together a pair of companies that have been mired in controversies for many years. BP, of course, is still closely identified with the 2010 Deepwater Horizon catastrophe in which an offshore well blowout killed eleven workers and caused an enormous oil spill in the Gulf of Mexico. The company has paid out more than $30 billion in fines and settlements linked to the accident.
BP’s U.S. operations were also tainted by a massive explosion in 2005 at a refinery in Texas City, Texas in which 15 workers were killed and 180 injured (the facility was later sold to Marathon Petroleum). The company also experienced serious spills at its operations in Alaska.
More recently, in 2023 BP agreed to pay $242 million to the U.S. Environmental Protection Agency to resolve both air and water pollution violations at its Whiting Refinery in Indiana. The allegations focused on releases of benzene, a carcinogen.
Shell’s biggest controversy has been in Nigeria, where for the past few decades it has faced protests and lawsuits over the environmental impact of its operations in the Niger Delta. In 2015 it paid $84 million to compensate the Bodo community for the effects of oil spills. In the United States, Shell has paid over $1 billion in fines and settlements in cases involving pollution, underpayment of federal leasing royalties, accounting violations, and foreign corrupt practices.
There is no reason to believe that a combined Shell-BP would be any less harmful to the environment. Along with their regulatory and legal infringements, the two companies have a history of participating in trade associations and lobbying groups that resisted regulation of greenhouse gas emissions and promoted climate skepticism. And both companies have been accused of trying to obscure those activities by engaging in greenwashing. Meanwhile, a recent academic study estimated that the major oil companies have caused trillions of dollars in economic harm from their greenhouse gas emissions. BP’s contribution to that amount was put at $1.45 trillion.
Consolidation has long been a way the oil industry dealt with its challenges. Chevron bought Gulf Oil in 1984, Texaco in 2001, and Unocal in 2005. It is now seeking to take over Hess. Exxon acquired Mobil in 1999. Conoco and Phillips Petroleum merged in 2002 to form ConocoPhillips, which in 2024 bought Marathon Oil.
Oil companies have faced allegations that they use their market power in anti-competitive ways. BP, for example, paid over $300 million to resolve civil and criminal allegations that it manipulated the propane market.
Instead of merging, oil companies should be thinking of ways to transition more quickly from fossil fuels to clean and renewable energy sources.