Economics Models and Exxon

Exxon Mobile ExxonMobil is the world's largest publicly traded international oil and gas company (ExxonMobil, N.d.). The industry is multifaceted and is composed of many different segments -- everything from the exploration of oil, the refinement process, and the transportation via ship, tanker, or pipeline. The oil and gas is of critical importance to the world's economy because there are many other industries are directly dependent upon these fuels. For example, oil can be used as a raw material to produce many other goods.

Furthermore, oil and gas are the preferred fuel for the world's transportation system that is responsible for moving goods and services globally, which has also become increasingly important as the world has rapidly become more globalized. John Galbraith challenged much of the conventional wisdom associated with classical economics (Economist View, 2006). One of his criticisms deal with what he refers to as the dependence effect. This thought deals with gigantic firms that produce "wants" from consumers and no firm is bigger than Exxon Mobile.

Except in this case oil is more of a commodity than a normal durable goods in which marketing can be used to create value from the consumer's perspective. On the other hand, Exxon does not really have any competitive pressures, or at least not much, from other fuel sources. Exxon has become so gigantic, and its network of distribution so large, that it doesn't really have many threats from competition that would come from alternative fuels.

Cars that run on electricity are sparse and it will be difficult to develop the infrastructure to make such a technology widespread. Therefore, it could be argued that Exxon has developed something of a dependence effect based on their market position. Another point that Galbraith makes is that the neoclassical theory of the firm does not hold when firms become gigantic because ownership and control are divorced. As a result a technostructure is put in place to manage the company and can have other motivation other than maximizing profits.

However, since oil and gas are basically a commodity with little differentiation, I think it is reasonable to argue that Exxon focuses on its profitability to a large extent. However, at the same time, it does also follow its affirmative purpose, which is corporate growth (Economist View, 2006). There is a global market for oil and gas, however much of this market is controlled by an oligopoly. Furthermore, Exxon has exhibited even worse behaviors to the public.

Not only has ExxonMobil been slow to officially recognize the fact that climate change is real, even though they have recently released documents from their own internal scientist about climate change, but they have also been accused of funding propaganda campaigns to the public (Kolmes, 2011). Galbraith did not believe that laissez-faire economics would lead to the concern for social good. I think Exxon and some of the revelations about the way they operate that have been leaked to press serve as a testament to that idea.

In another economic model, Walt Rostow develops five stages of national growth for a county's economy. Exxon is definitely in Stage 5 in its domestic economy of the U.S., which is high mass consumption (Ford, 2004). However, since Exxon operates in almost every major market on the globe, the corporation could be viewed as being in countries that are.