Lately, companies like Exxon Mobil (XOM), British Petroleum (BP), and Chevron (CVX) have been trying to stay under the radar as the prices they charge for their products keep dropping. Oil demand is just not there anymore, so the current price per barrel has lingered well under $50 – down from stratospheric highs last year.

What are these oil companies to do when faced with people who have stopped using their products?

I expect to see that oil companies currently sitting on hoards of cash will diversify into other industries with a new found passion. Stock prices are at historic lows and company CEOs are more eager than ever to take golden parachutes, so these oil companies may find boatloads of cheap companies to buy out there.

He’s smiling, but the oil business is really no fun
 and profits are dropping.
Expect oil companies to change all that
with some aggressive diversification.

Exxon charged these kids $2 each to watch a Texas oil refinery fire.  The company is still experimenting with this business model.

To illustrate what this formerly high-flying oil company is going through, imagine for a moment that you run a hotdog stand; one day you notice not as many people seem to be stopping in for their hotdog fix and so you have to drop your prices. That doesn’t help either, so your revenues drop drastically. But you keep smiling and assume things will get better. But it has been a year. The McDonalds (MCD) joint down the block and the Starbucks (SBUX) coffee shop across the street seem to be selling their products like before, but people have just lost their taste for your hotdogs. Who knows why?

You are a smart hotdog stand business person, you have grown accustomed to the bazillion-dollar paychecks, and you just don’t want to even think about flying commercial instead of in your private luxury corporate jet. So you need to do something. And fast!

Diversification is the answer…

This is nowhere near a General Motors (GM), Citigroup (C), or Southwest Airlines (LUV)-level problem, since Exxon Mobil has all that cash sloshing around in the basement. For now…

That’s right; don’t be surprised if any day now Exxon Mobil starts to announce strategic acquisitions in totally different businesses. Basically, they have these gasoline stores all over the country (maybe the world, but I couldn’t get the research budget approved to charter a jet for a quick trip to all seven continents to visit Exxon Mobil gas stations) they could use to sell other things beside fuel, oil, and three-month-old cans of Coca-Cola (KO).

And… The oil business just doesn’t seem to be that much fun.

The Exxon electric car – Someone down in product development couldn’t understand why the Exxon board stopped this project.

Exxon Mobil “Oil Land” theme park.  
Will be located off the coast of New Jersey. All the other states rejected it.

Maybe those stock prices are down because fun is out of style for now, but that will not last long. At some point, people start to realize that sitting at home with their families is not really that much fun – especially after playing Scrabble – made by Hasbro Inc. (HAS) – 234 nights in a row or after a robust argument over who has power over the Netflix (NFLX) DVD rental list. This spending time with family in close quarters when generous amounts of beer – made by Molson Coors Brewing Company (TAP) - is not involved can be potentially fatal over the long term. Families should come with labels like cigarette – made by Altria (MO) – packages.

Any day now, expect fun to come back in style. And don’t be surprised if Exxon Mobil is the new owner of that fun, since oil seems to be going out of style and may not be coming back.

$1.46 billion - MGM Mirage (MGM) – This company is the king of fun. They own most of Las Vegas and everyone there seems to be having a good time. Especially Mr. Kirk Kerkorian, their major shareholder. He always has a smile on his face.

$29.16 billion – Diageo (DEO) – This manufacturer of fine products like Smirnoff vodka, Johnnie Walker scotch whiskies, Captain Morgan rum, Baileys Original Irish Cream liqueur, Tanqueray gin, and Guinness stout deals in liquids that are priced even higher per gallon that gasoline. And these prices have not dropped as much as Exxon’s products.  The price tag for Diageo might look high, but after sampling the goods for a few hours, those Exxon guys will sign the check.

More expensive than gasoline and tastes better.

Would you rather work there or in a Middle Eastern oil field?

Why stop there, since buying companies like NewsCorp (NWS) at $6.95 billion with its movie studios, Winnebago (WGO) for $195.98 million with its motor homes, Harley-Davidson (HOG) at $4.2 billion with those cool motorcycles, Chuck E. Cheese (CEC) at $680.25 million with fun games and cardboard pizza, and Carnival Cruise Lines (CCL) at $19.94 billion with its fleet of fun ships would still leave Exxon with cash to spare?

If you add up the four main actuations shown above, the bill at the checkout counter would be a mere $72.49 billion, leaving an extra $155.51 billion to spend.  The problem is there will be other built-in expenses related to these company purchases, including legal fees of somewhere around $100 billion, sales tax of $9.23 billion, and my finder’s fee of $46.28 billion. 

If you think that $46.28 billion sounds high for me, consider that most of that will be eaten up when my kids go to college and to make up for the losses in my 401K over the last year.