The Ethane Nobody Else Can Buy at That PriceNarrow moat

ExxonMobil (XOM) — moat facet

Cheap American gas is a genuine structural advantage inside the worst-returning business ExxonMobil owns.

Chemical Products is ExxonMobil's worst-returning segment and it contains one of the company's clearest structural advantages, which is an awkward combination worth explaining carefully.

The feedstock gap: American gas against European$3.43Henry Hub 2025$12.39TTF (Europe) 2025$2.27Henry Hub 2024$10.77TTF (Europe) 2024Realised prices, $ per million British thermal units. An ethane cracker runs on the first one.
A European or Asian producer cracking naphtha cannot buy its way to that cost.

The advantage is feedstock. American ethylene crackers can run on ethane, a component of natural gas, rather than on naphtha, a refinery product priced off crude. When gas is cheap relative to oil the ethane route is dramatically cheaper, and the United States has had cheap gas since the shale revolution — realised Henry Hub was $3.43 per million British thermal units in 2025 against a TTF price in Europe of $12.391. A European or Asian producer cracking naphtha cannot buy its way to that cost.

The second quarter of 2026 shows what it is worth. Chemical Products earnings rose from $293 million to $1,131 million, and the driver analysis attributes $980 million of that to increased North America ethane feed advantage and performance chemical margins2. Chemical sales volumes in the same quarter fell from 5,264 to 4,471 thousand metric tons3. The company sold fifteen per cent less and earned nearly four times as much.

The problem is what the rest of the cycle looks like. Chemical Products earned $1,637 million in 2023, $2,577 million in 2024 and $800 million in 2025, and in 2025 the non-US half of the segment lost $103 million4. Return on average capital employed for the whole segment was 2.7 per cent on $29,510 million of capital5. The industry has been in a capacity glut, driven largely by Chinese plants built through a decade of subsidised expansion, and a feedstock advantage does not save a producer from a market with more supply than demand.

What ExxonMobil is doing about it is moving up the value chain rather than out of the business: performance chemicals, which the company defines as products that provide differentiated performance for multiple applications versus commodity alternatives6. That is a real distinction, and the reason it appears in the same driver line as the ethane advantage is that both work at once.

It comes down to the spread between the American and non-American halves of the segment. In 2025, United States Chemical Products returned 6.4 per cent and the non-US half minus 0.7 per cent7. The feedstock advantage is the whole of that gap, and it holds only while American gas stays cheap relative to crude.

Moat trajectory: Narrowing

The feedstock advantage is intact and the market around it is not. Chemical Products returned 2.7 per cent on $29,510 million of capital in 2025 with the non-US half losing money, after 8.9 per cent the year before. The North America ethane advantage delivered $980 million of improvement in a single quarter of 2026, which shows the mechanism works; the multi-year returns show the industry does not.

The number that tests this moat
Reported
Chemical Products return on capital employed
2.7% on $29,510 million

Down from 8.9% the year before, with the non-US half at minus 0.7 per cent. The North America ethane feed advantage is real and delivered $980 million of improvement in a single quarter of 2026; it does not rescue a segment in a global capacity glut. Watch the spread between the American and non-American halves, which is the whole of the feedstock advantage.

Source: Exxon Mobil Corporation Form 10-K, fiscal year 2025 ↗
⚠ Threats to the moat
⚠ THREAT 01
Two Point Seven Per Cent on Thirty Billion Dollars
Ten per cent of the company's capital is invested in a business that earned a third of a bank deposit.
References
  1. ReportedWhen gas is cheap relative to oil the ethane route is dramatically cheaper, and the United States has had cheap gas since the shale revolution — realised Henry Hub was $3.43 per million British thermal units in 2025 against a TTF price in Europe of $12.39.
    Exxon Mobil Corporation Form 10-K for FY2025, Market Risks — worldwide average realisations for Brent, Henry Hub and TTF, and the disclosed sensitivity of Upstream earnings to a one dollar change in Brent, a ten cent change in Henry Hub and a ten cent change in TTF. — FY2025 · publ. February 2026 · source ↗
  2. ReportedChemical Products earnings rose from $293 million to $1,131 million, and the driver analysis attributes $980 million of that to increased North America ethane feed advantage and performance chemical margins.
    ExxonMobil Holdings Corporation Form 10-Q for the quarter ended 30 June 2026, Management's Discussion and Analysis — the review of second quarter results, the segment earnings driver analyses for Upstream, Energy Products, Chemical Products and Specialty Products, the operational results tables for production, refinery throughput and sales volumes, the liquidity discussion, and the structural cost savings calculation. — Q2 2026 · publ. August 2026 · source ↗
  3. ReportedChemical sales volumes in the same quarter fell from 5,264 to 4,471 thousand metric tons.
    ExxonMobil Holdings Corporation Form 10-Q for the quarter ended 30 June 2026, Management's Discussion and Analysis — the review of second quarter results, the segment earnings driver analyses for Upstream, Energy Products, Chemical Products and Specialty Products, the operational results tables for production, refinery throughput and sales volumes, the liquidity discussion, and the structural cost savings calculation. — Q2 2026 · publ. August 2026 · source ↗
  4. ReportedChemical Products earned $1,637 million in 2023, $2,577 million in 2024 and $800 million in 2025, and in 2025 the non-US half of the segment lost $103 million.
    Exxon Mobil Corporation Form 10-K for FY2025, Management's Discussion and Analysis — Business Results: segment financial results and identified items, the 2025 earnings driver analyses for each segment, and the Upstream highlights covering the Permian, Guyana, LNG and the major project portfolio. — FY2025 · publ. February 2026 · source ↗
  5. ReportedReturn on average capital employed for the whole segment was 2.7 per cent on $29,510 million of capital.
    Exxon Mobil Corporation Form 10-K for FY2025, Business Profile (Financial) — earnings after income taxes, average capital employed, return on average capital employed and cash capital expenditures for each segment and geography, and the corporate total. — FY2025 · publ. February 2026 · source ↗
  6. ReportedWhat ExxonMobil is doing about it is moving up the value chain rather than out of the business: performance chemicals, which the company defines as products that provide differentiated performance for multiple applications versus commodity alternatives.
    Exxon Mobil Corporation Form 10-K for FY2025, Frequently Used Terms — the definitions and calculations of cash flow from operations and asset sales, capital employed, return on average capital employed, the earnings drivers (advantaged volume growth, advantaged assets, high-value products, base volume, structural cost savings, expenses, timing effects), and the full structural cost savings reconciliation against 2019. — FY2025 · publ. February 2026 · source ↗
  7. ReportedIn 2025, United States Chemical Products returned 6.4 per cent and the non-US half minus 0.7 per cent.
    Exxon Mobil Corporation Form 10-K for FY2025, Business Profile (Financial) — earnings after income taxes, average capital employed, return on average capital employed and cash capital expenditures for each segment and geography, and the corporate total. — FY2025 · publ. February 2026 · source ↗
Sources
Generated September 23, 2026