Exxon Mobil Corp. is on the brink of finalizing a deal worth $60 billion to acquire energy-exploration company Pioneer Natural Resources. This proposed merger has the potential to significantly impact the renowned oil-rich Permian Basin in Texas.

However, this transaction is expected to draw the attention of the Biden Administration's antitrust enforcers, particularly Federal Trade Commission Chair Lina Khan, due to the critical political importance of oil and gasoline prices.

Given Congress's historical concern about price increases at the pump, the Federal Trade Commission (FTC) will undoubtedly scrutinize this acquisition closely, according to Stephen Calkins, former general counsel at the FTC.

President Joe Biden's political vulnerability related to the high cost of living, compounded by years of historic inflation, adds further significance to this deal. A recent poll conducted by Investors Business Daily revealed that only 24% of voters approve of President Biden's economic record, making gasoline prices a key campaign issue.

President Biden has specifically promised to address gas prices, stating during a speech in Maryland last month, "I'm going to get those gas prices down again, I promise you."

However, any potential challenge to this merger must be based on an analysis of the market's dynamics and whether it poses a threat to competition that could result in higher consumer prices or other adverse effects.

Frederick Lawrence, director and energy analyst at Capital Alpha Partners, highlighted that there is considerably more competition in the oil exploration and production market, where Pioneer plays a prominent role, compared to segments such as gasoline stations, pipeline operators, or refining.

He pointed out that independent oil companies account for approximately 85% of natural gas production and 65% of oil production in the United States. This fact makes it challenging for the Exxon acquisition to substantially reduce competition in the oil exploration sector.

The Rising Importance of Independent Oil Communities

"People just think about big oil and they forget that there’s a very healthy independent community out there competing," acknowledges an industry insider. However, it's crucial to recognize the dominance of Exxon Mobil, the 800-pound gorilla of the upstream oil value chain, as they undergo increased scrutiny.

Potential Delay in Deal Completion

Investors must brace themselves for a potentially protracted acquisition process, unlike other industries. To illustrate, the recent transaction between private equity firm Quantum and natural gas producer EQT encountered delays due to additional information requests from the FTC. Ultimately, it took nearly a year for the deal to be consummated after its announcement in August.

Unusual Theories of Competitive Harm

Antitrust enforcers from the Biden administration have displayed a willingness to explore unconventional hypotheses regarding competitive harm. As a result, the impact of this merger on downstream businesses, such as refiners and gasoline retailers, will be thoroughly examined. Furthermore, the acquisition will be scrutinized for any instances of anticompetitive behavior that could enhance the acquiring company's market power through the transfer of valuable yet obscure assets.

The Challenge of an Overburdened FTC

The FTC faces multiple challenges, including its existing workload and ongoing litigations against well-established companies like Amazon.com Inc. Concerns have been raised regarding the agency's resources and their ability to handle additional responsibilities. Adequate staffing with the necessary skill set is paramount to manage the ever-increasing demands on the FTC's plate.