Shell in Early Talks to Acquire BP

Summary

WSJ What’s News: Shell in Early Talks to Acquire BP
Episode Release Date: June 25, 2025

Introduction

What's News by The Wall Street Journal delivers the day's most significant updates from business, finance, global, and political spheres that influence markets. In this episode, host Alex Osila delves into Shell's potential acquisition of BP, examines the surprising outcome of the New York City mayoral primary, explores shifts in the U.S. housing market and gas prices, and discusses evolving geopolitical dynamics involving the U.S., Iran, China, and Russia.

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Shell in Early Talks to Acquire BP

Potential Landmark Acquisition

At the heart of today's discussion is the breaking report that Shell is in early-stage talks to acquire BP, marking what could be the largest oil deal in a generation. According to Alex Osila at [01:00], "Today, we're exclusively reporting that Shell is holding early stage talks to acquire rival BP and what would be the largest oil deal in a generation." Although Shell has dismissed the report as "further market speculation" ([01:12]), BP has yet to comment.

Significance and Strategic Benefits

Ben Dummett, a WSJ reporter, provides a comprehensive analysis of the potential merger:

• Market Positioning: Combining Shell and BP would create a formidable UK-based energy champion, better equipped to compete against super majors like Chevron and ExxonMobil ([01:43]).

• Expansion of Operations: For Shell, the acquisition would expand its global trading business and strengthen its presence in liquefied natural gas, particularly in the Gulf of Mexico ([02:14]).

• BP’s Perspective: BP, having underperformed in stock markets compared to Shell, stands to benefit from the merger by leveraging Shell's stronger market position. Additionally, activist investor Elliott Investment Management, holding over a 5% stake in BP, is advocating for significant changes, making BP more open to a takeover ([02:45]).

Regulatory Hurdles

The merger would undoubtedly attract scrutiny from UK regulators due to the consolidation of the country's two largest energy producers. Ben Dummett notes that global regulatory bodies, including those in the U.S., would review the deal. However, he suggests that antitrust issues might be manageable, drawing parallels to scenarios like Saudi Arabia's Aramco ([03:35]). Furthermore, the UK might favor the merger to establish a national champion capable of resisting foreign acquisitions ([04:26]).

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U.S. Housing Market and Economic Indicators

Decline in Single-Family Home Sales

A recent report from the Commerce Department reveals a 13.7% drop in U.S. new single-family home sales in May compared to April. This decline, attributed to persistent high mortgage costs, fell below market expectations, indicating ongoing concerns about the housing market's health.

Stock Market Performance Amid Geopolitical Stability

U.S. stock indices hovered near record highs, bolstered by the sustained Israel-Iran ceasefire. However, the markets showed mixed results with the Nasdaq up by 0.3%, the Dow Jones Industrial Average down by 0.25%, and the S&P 500 remaining flat ([04:34]).

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Gas Prices and Consumer Confidence

Falling Gas Prices Provide Economic Relief

The average national gas price has decreased to $3.21 per gallon, a drop of approximately 23 cents from the previous summer. Roshan Fernandez, a WSJ reporter, emphasizes the positive impact of lower gas prices on consumer sentiment:

"Gas prices have a pretty big influence on your perspective on the economy... They see them on the roadside signs. They see them on the roadside signs. So it's a pretty strong indicator in a lot of people's minds of how well the economy is doing." ([05:54])

This decline is attributed to a plentiful supply and reduced oil prices following the easing of tensions between Israel and Iran. Lower gas prices are expected to enhance consumer confidence and potentially stimulate economic activity through increased discretionary spending.

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New York City Mayoral Race and Wall Street's Reaction

Unexpected Victory for Socialist Candidate

In a surprising turn of events, Zoran Mamdani, a Democratic socialist, triumphed in the Democratic primary for New York City's mayoral race, defeating former Governor Andrew Cuomo. Alex Osila reports, "Democratic socialist Zoran Mamdani, who up to a few weeks ago was considered a long shot candidate, won at the Democratic primary for New York City's mayor over former Governor Andrew Cuomo." ([07:07])

Wall Street’s Surprised Response

Kevin Dugan, a WSJ reporter covering Wall Street's reaction, explains the unexpected outcome:

"The people who I've been talking to are very surprised at this, but there's some nuance to this. They are also kind of seeing that the Cuomo campaign was based on a feeling of confidence that the former governor was going to kind of take this over and people underestimated the ground game that Zoran Mamdani brought to New York City in order to win." ([07:31])

Concerns Over Mamdani's Platform

Wall Street's apprehensions center around Mamdani's proposals, particularly tax increases for high earners and strategies to address quality of life issues such as crime and homelessness. Kevin Dugan highlights:

"People were expecting Cuomo to win, but it did not feel like very enthusiastic support of Cuomo. When it comes to mam Donnie their concerns are primarily over taxes. He wants to raise taxes on people who are making more than a million a year, as well as some general quality of life issues, crime in the city, the homeless population." ([08:03])

While there is minimal support for Mamdani within Wall Street, primarily from non-finance roles like software engineers and administrative staff at major banks, it reflects a broader shift in the workforce towards technology and diversified services ([08:43]).

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U.S-Iran Relations and Nuclear Deal

President Trump's Stance on Nuclear Deal

Following U.S. strikes on three Iranian nuclear sites, President Trump stated that he does not consider a nuclear deal with Iran necessary. Speaking after the NATO summit, he indicated plans for talks with Tehran, reiterating the demand for Iran to refrain from developing nuclear weapons ([09:23]).

Leaked Intelligence Report and FBI Probe

Defense Secretary Pete Hegseth announced that the FBI is investigating how a leaked intelligence report estimated that the U.S. strikes would only delay Iran's nuclear ambitions by a few months, prompting questions about the leak's origins and intent ([09:23]).

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China-Russia Gas Pipeline Implications

China's Strategic Shift to Russian Natural Gas

Amid the renewed conflict between Israel and Iran, China is intensifying its efforts to secure additional natural gas from Russia. Existing pipelines, like the Power of Siberia established in 2019, are being supplemented by plans for a larger pipeline to boost the supply of Russian gas to China. Georgi Kanchev, a WSJ foreign correspondent, elaborates:

"China has ultimately seen that it needs other alternatives... China is thinking long term because there's other reasons why China would need more gas. China is also looking to gas as a bridge fuel between the current exposure to hydrocarbons and the future, where you have renewable energy for most of your energy needs." ([10:33])

Geopolitical Ramifications

The proposed pipeline signifies a strengthened alliance between China and Russia, providing Russia with essential revenue to support its endeavors in Ukraine and military reconstitution. For China, it ensures a more stable and diversified energy supply, reducing reliance on Iranian oil and enhancing energy security. Georgi Kanchev notes:

"If such a pipeline is agreed, it's going to be a big sign that the China and Russia leadership managed to bind those countries closer together, meaning the alliance is pretty strong." ([11:13])

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Conclusion

This episode of What's News provides a comprehensive overview of significant developments in the global energy sector, U.S. economic indicators, political shifts within influential cities, and evolving international relations. From Shell's strategic maneuvers in the oil industry to geopolitical realignments involving major world powers, the insights presented offer listeners a clear understanding of factors shaping today's economic and political landscape.

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Produced by Anthony Banci with supervising producer Michael Kosmides and additional support by Colman Standifer.

Transcript

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[Alex Osila]

Shell is in early talks to acquire bp, a potential landmark combination of two multinational oil giants. Plus Wall street is stunned over the upset in the primary election for New York City mayor.

[Kevin Dugan]

People were expecting Cuomo to win, but it did not feel like very enthusiastic support of Cuomo. When it comes to mom Donnie, their concerns are primarily over taxes and why.

[Alex Osila]

A cheap summer road trip could change consumers minds about the economy. It's Wednesday, June 25th. I'm Alex Osila for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world. Today, we're exclusively reporting that Shell is holding early stage talks to acquire rival BP and what would be the largest oil deal in a generation. That's according to people familiar with the matter. Shell said after the Journal reported of the talks that the report quote is further market speculation. No talks are taking place. A BP spokesman declined to comment. Reporter Ben Dummett is here to tell us more. Ben, these are two huge companies. What is the significance of this move?

[Ben Dummett]

I take your point that both Shell and BP are huge energy producers and they have giant market caps. But when you compare them with the likes of ExxonMobil, then Chevron, they're smaller. So the combination of these two, both of which are based in the UK would create this UK energy champion and at the same time give the combined entity the added have to be better positioned to take on the challenge of the so called super majors like Chevron and Exxon.

[Alex Osila]

What's in it for Shell? Why do this?

[Ben Dummett]

First of all, for Shell to do this, it would be a big challenge. There's a lot of integration, there's complication in terms of bringing together different cultures so selling overlapping assets. But that said, it would basically expand Shell's global trading business and it would dominate bolster its dominance in areas such as liquefied natural gas Analysts investors have said that the matchup was good for the companies because of their operations in the Gulf of Mexico.

[Alex Osila]

And how about bp? What's in it for them?

[Ben Dummett]

BP is a smaller entity and it is underperformed Shell for the past several years in terms of its stock market performance. That explains Shell's interest in the sense. That timing makes sense because it's in a relatively stronger position to do a deal like this. At the same time, bp, because of its relative weakness, that makes it more susceptible to a takeover. That's particularly true when you've got Elliott Investment Management, the well known active investor that has over a 5% stake in BP and they're pushing for big changes as the company. One way of achieving that is to go it alone and the other way of achieving that is become perhaps part of a bigger entity.

[Alex Osila]

Given the sheer size of these companies and their respective market shares, how likely is it that this deal could go through regulators?

[Ben Dummett]

Well, it would certainly draw the scrutiny of the UK regulators because you are bringing together the country's two biggest energy producers. There's no doubt, because these companies have operations globally, it would necessitate review by regulators all over the world, including the US obviously, where they both have big operations. That said, if you look at oil producers like Aramco, for example, in Saudi Arabia, you'd be hard pressed to argue that they would have any real influence on the oil price long term. So I'm not sure that antitrust issues would be a big deal. At the same time, the UK could look favorably on this type of tie up because you create this national champion and therefore strengthen that entity to ward off possible foreign suitors.

[Alex Osila]

That was WSJ reporter Ben Dummett. Thank you so much, Ben.

[Ben Dummett]

Thanks for having me. I really appreciate it.

[Alex Osila]

A report from the Commerce Department out today showed that sales of US new single family homes fell 13.7% in May from the month before. The numbers, which were below expectations, come amid continued concerns over high mortgage costs. U.S. stocks hung near record levels today as the Israel Iran cease fire continued to hold. Meanwhile, Federal Reserve Chair Jerome Powell gave his second day of testimony on Capitol Hill. Bets on a July interest rate cut have risen modestly in recent days after two Fed officials signaled they were open to the possibility. Still, major US Indexes ended the day mixed. The Nasdaq was up about 0.3%, the Dow dropped a quarter of a percent, and the S&P 500 stayed flat. For many Americans, summer is road trip season and this summer, people hitting the road might find less pain at the pump than they expected. The average price of a gallon of gas is $3.21 nationally, about 23 cents cheaper this summer than it was last year thanks to plentiful supply. And as of yesterday, oil prices were lower than before Israel and Iran's conflict began. Reporter Roshan Fernandez says the reduced prices would be a boon for consumers and may boost their confidence in the US Economy.

[Roshan Fernandez]

Gas prices have a pretty big influence on your perspective on the economy, just given the fact that people drive a lot, so they see their gas prices pretty regularly at the pump. They see them on the roadside signs. So it's a pretty strong indicator in a lot of people's minds of how well the economy is doing. One good example, a recent survey from the national association of Convenience Stores showed that just over two thirds of people would drive five minutes out of their way just to save five cents a gallon on gas.

[Alex Osila]

Coming up, why Wall street is panicking over the prospect of a socialist mayor of New York City. That's after the break.

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[Alex Osila]

This morning, the world's epicenter of capitalism woke up to find it may soon have a socialist mayor. Democratic socialist Zoran Mamdani, who up to a few weeks ago was considered a long shot candidate, won at the Democratic primary for New York City's mayor over former Governor Andrew Cuomo. Kevin Dugan covers the culture of Wall street at the Journal.

[Kevin Dugan]

Kevin?

[Alex Osila]

Kevin I'm curious about what Wall Street's reaction was to this win on Wall Street.

[Kevin Dugan]

The people who I've been talking to are very surprised at this, but there's some nuance to this. They are also kind of seeing that the Cuomo campaign was based on a feeling of confidence that the former governor was going to kind of take this over and people underestimated the ground game that Zoran Mamdani brought to New York City in order to win.

[Alex Osila]

You mentioned that Wall street was really backing Cuomo. What kinds of concerns did they have over Mamdani's platform?

[Kevin Dugan]

People were expecting Cuomo to win, but it did not feel like very enthusiastic support of Cuomo. When it comes to mom Donnie their concerns are primarily over taxes. He wants to raise taxes on people who are making more than a million a year, as well as some general quality of life issues, crime in the city, the homeless population. How is he going to deal with that and how is he going to keep New York City to be a livable place? People are concerned that some of those issues are going to get worse.

[Alex Osila]

Given this sort of less than enthusiastic support of Cuomo. Were there any sort of pockets of Mamdani support within Wall Street?

[Kevin Dugan]

They're small, definitely the minority. But you're seeing in the data from from the campaign finance board that there were plenty of people who worked at some of Wall Street's biggest banks who were donating to Mamdani. Often these were people who were not in finance roles, although you do occasionally see them. These are typically software engineers, people who work in administrative roles. It kind of speaks to how different Wall street banks have become where they rely so much on technology, broader services to encompass more of the general population.

[Alex Osila]

That was WSJ reporter Kevin Dugan. Thanks, Kevin.

[Kevin Dugan]

Thank you.

[Alex Osila]

President Trump said he doesn't think a nuclear deal with Iran is necessary after the US Strikes on three Iranian nuclear sites. Speaking at a press conference at the end of the NATO summit today, he added that there would be talks with Tehran next week and that he would be asking the Iranians for the same thing as before Israel attacked Iran, that Tehran does not develop nuclear weapons. Trump also pushed back on a leaked intelligence report that said the US Strikes on Iran's nuclear facilities only set back Tehran's nuclear ambitions by a few months. Defense Secretary Pete Hegseth said the FBI has started a probe into how the preliminary assessment became public. The war between Israel and Iran has revived China's interest in a pipeline that would import Russian natural gas. That's according to people close to Beijing's decision making. The countries already do have one pipeline called the Power of Siberia, which opened in 2019. This newer project would be a bigger pipeline that could significantly boost the supply of natural gas that Russia sends to China. For more, I'm joined now by WSJ foreign correspondent Georgi Kanchev. Georgi, why does China want to turn to Russia for natural gas?

[Georgi Kanchev]

China has ultimately seen that it needs other alternatives. China Overall buys around 90% of Iran's oil exports, so definitely that word has increased concerns in Beijing about the reliability of those deliveries. This is definitely a long endeavor and that's why this pipeline wouldn't be a short term solution. But China is thinking long term because there's other reasons why China would need more gas. China is also looking to gas as a bridge fuel between the current exposure to hydrocarbons. In the future, where you have renewable energy for most of your energy needs.

[Alex Osila]

What would the geopolitical impact be of this kind of endeavor?

[Georgi Kanchev]

It's really important for Russia because Russia has in the past been the biggest supplier of gas to Europe after its war in Ukraine. Russia has lost most of that market, so now it wants to redirect that gas. China is a logical place. Also, Russia needs the cash to fund its war in Ukraine and reconstituting its army. If such a pipeline is agreed, it's going to be a big sign that the China and Russia leadership managed to bind those countries closer together, meaning the alliance is pretty strong. And from the Chinese perspective, of course, they would get definitely cheaper gas and they will diversify their deliveries of gas for sure.

[Alex Osila]

That was WSJ foreign correspondent Georgi Kanchev. Thanks, Georgi.

[Georgi Kanchev]

Thank you.

[Alex Osila]

And that's what's news for this Wednesday afternoon. Today's show is produced by Anthony Banci with supervising producer Michael Kosmides. Additional support by Colman Standifer. I'm Alex Osoloff for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.