Time for Big Oil to Rethink Its Bigness?

For Marathon Oil Chief Executive Officer Clarence P. Cazalot Jr., the breaking point came in mid-2008: Profits from its refineries plunged by more than $1 billion during the second quarter, even as crude surged toward an all-time high of $147.27 a barrel that summer. How could that be? The Houston-based company was having to buy 95 percent of the oil it turned into gasoline from rivals because its 2,300 wells were too far away or pumped the wrong kind of crude.

Marathon’s chief decided it was time to quit the refining business and stick to drilling for oil. “There’s not a CEO out there who wants to run a smaller company, but shareholders don’t pay me to just run a big company,” said Cazalot in late August, a couple of months after Marathon spun off its refineries, pipelines, and truck stops into an entity called Marathon Petroleum.