U.S. energy giant ExxonMobil Corp. finalized a nearly $60 billion all-stock deal to acquire the West Texas oil and gas producer Pioneer Natural Resources, potentially foreshadowing the beginning of a wave of consolidation across the industry.

If the deal passes regulatory hurdles, it would more than double Exxon’s oil production to 1.3 billion barrels a day in the Permian Basin, the largest oil field in the U.S., located around the border of New Mexico and Texas. Beyond its size, the low costs of extraction and transportation in the Basin have made it the epicenter of a historic surge in U.S. oil and gas production.    

The sale also increases Exxon’s exposure to demand-side disruptions to the fossil fuels industry, such as the ongoing global transition to green technologies. While Exxon has made commitments to and has invested in climate technologies, an example being its recent $4.9 Billion acquisition of carbon capture firm Denbury Inc., those investments have focused on offsetting the harm of fossil fuels rather than replacing them.

“It’s a massive oil deal that demonstrates ExxonMobil’s bullishness on longish-term oil demand and prices,” Tom Ellacott, vice president of corporate research at energy consulting firm Wood Mackenzie, said. Part of that bullishness may be explained by the geopolitical implications of transitioning away from fossil fuels, which would create short-term dynamics such as reduced investment and decreased supply, which may benefit producers.

With respect to the sale’s effect on competition, Exxon’s acquisition of Pioneer increases pressure on Exxon’s large rivals to engage in similar consolidation efforts to maintain market share. Furthermore, many smaller independent operators that have historically defined the Permian Basin oil industry have been hit by higher costs of capital, higher exploration costs and the exhaustion of their most productive wells, making them cheaper acquisitions for their larger competitors.

“There are too many companies,” partner at Kimmeridge Energy Management Mark Viviano said. “Consolidation is the last piece of the puzzle in rationalizing the shale industry.”

The acquisition would require approval from the Federal Trade Commission before it could close, prompting antitrust advocates to argue for action to prevent harm to consumers.

“Consolidation will make it even easier for [oil companies] to reduce output and increase prices, which are classic symptoms of reduced competition,” Matt Stoller, director of research for American Economic Liberties Project, said.

FTC scrutiny is not unexpected. Under the leadership of FTC Chair Lina Khan, the agency has pursued more stringent antitrust enforcement and regulation, including a tougher approach to corporate mergers and acquisitions, making a careful review likely.

Despite that scrutiny, it is doubtful that FTC action could stop the sale of Pioneer. 

“The deal is almost entirely upstream and while FTC approval will be necessary, the combined entity represents ~10% of total Permian oil production,” David Deckelbaum, an analyst at TD Cowen, noted, saying that “levels that should prove quite acceptable.”