A shake-up in the Dow Jones Industrial Average shows just how far once mighty oil companies have fallen in the corporate pecking order.
Unlike some other indexes, the Dow is weighted by the share price of its components, and not their market value. Adding Salesforce helps ensure the tech industry is properly represented. It’s a symbolic knock for Exxon, which was once the world’s most valuable public company and has been a member of the Dow since 1928. The oil and gas giant has seen shares plunge nearly 40% this year amid huge pressure on crude prices, while tech companies like Amazon and Google parent Alphabet have rallied. Once Exxon is removed, Chevron (CVX) will be the Dow’s only oil and gas company. Bernstein oil analyst Oswald Clint told me that it’s too early to count Exxon out entirely. While sentiment amid the pandemic is „very depressed,“ commodity prices could rally if demand recovers, giving Exxon a boost. (Companies can be added back to the Dow; Honeywell is rejoining after it was kicked out in 2008.) But for the time being, Exxon remains a „tough sell,“ Clint said. He noted that investors have recently favored oil companies in Europe like BP and Equinor that are speeding up their transition to renewable fuel. Exxon, for its part, has stuck to its old playbook. Investor insight: BP (BP) shares rose sharply after the company said earlier this month it would slash oil production by 40% and pour billions into green energy. They’ve since dropped again, but are still up more than 2% this month. Though the pandemic has sparked debate about whether oil demand can ever recover, Clint emphasized that the consensus view among industry professionals is that it will bounce back once the threat of the virus recedes.
