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I think the industry is changing more than most people realize, and has been more lucky.
Can you explain in what ways, and how that could affect Exxon in the future...

My thinking isn't very specific, but the fundamental issue is that the
nature of the business isn't primarily producing a product or service,
but digging up something pre-existing then selling it. For this to be
sustainable requires an ongoing ability to find new sources, cheaply, of that
material in new places that you'll be allowed to dig up and sell as if it's yours.
This dynamic has pretty much come to an end.
So, you manage downwards: profit sharing with the sovereigns, then
service contracts with the sovereigns, then...? A comfortable retirement?

There is no control of product pricing, no moat, no control of input costs,
and a huge headwind in terms of rising costs for sourcing and extracting what you do.
Things are getting worse on that front and will continue to do so.
And, to belabour the obvious, there is only so much stuff to be dug up.

None of these is sufficient to suggest that Exxon won't do well.
My reticence is not that simple, or specific, or quantified or justified.
They are definitely very good operators, and spectacular capital allocators,
but I fear that they are drifting inexorably towards being the best
players in a business with very difficult economics.
Plus, the trend is getting very much worse very rapidly.
And we all know the saying. "When a management with a reputation for
brilliance tackles a business with a reputation for bad economics..."

In the end it simply comes down to my perception that it's a business
where many people smarter than I am will make lots of money.
But I have fears, and those are sufficient to keep me away.
As it happens I'm down to zero allocation to energy firms as of this
week for the first time in many years, other than some indirect
exposure via my holding in Loews.

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