International Oil Companies (IOCs)

International Oil Companies (IOCs) are also known as Integrated Oil Companies because these companies combine the activities of Exploration and Production (E&P) and Refining and Marketing (R&M).

Before the days of OPEC, price increases on oil were difficult to get. Oil is a commodity and without a price setting (or fixing) mechanism, like OPEC (and the Texas Railroad Commission before that), prices tend downward. This graph illustrates the point:

Trying to avoid price competition, the oil companies tried to create the perception of value. Not only were there ads to "put a tiger in your tank," but businesses were vertically integrated so that brands and supply control could be developed.

No longer do the companies need to be integrated. Although none of the IOCs have dis-integrated, there are E&P only companies, such as Anadarko Petroleum (APC) and R&M only companies, such as Valero Energy (VLO) for analysis. By studying the characteristics of each, some of the IOCs might be understood by a component valuation approach.