Still, such an acquisition would mean almost a complete overhaul of the US oil industry within the past 12 months. Prodded by sliding oil prices and the need to slash costs to compete in a truly global market, large oil companies have been rushing to combine. Shareholders of Exxon Corp, the largest US energy company, and Mobil Corp, No 2, are set to vote later this month on their transaction. Last year, British Petroleum acquired Amoco Corp, then the fifth-largest concern.

Then, just last month, the new BP Amoco PLC agreed to buy No 6, Atlantic Richfield Co Willing to Look Kenneth T Derr,Chevron's 62-year-old chairman and chief executive, and Peter I Bijur, Texaco's 57-year-old CEO, have both said in recent speeches that they don't need a partner to be successful. But they also have said they would consider a merger with another company if the deal adds to cash flow or makes them much more efficient. Neither Chevron, based in San Francisco, nor Texaco, based in White Plains, NY, would comment.

To analysts, a Chevron-Texaco marriage makes less sense than the other mega oil mergers in the past year. Both companies have been actively slashing costs on their own, and Texaco last year formed an extensive refining alliance with Shell Oil Co, the US unit of the Anglo-Dutch consortium Royal Dutch/Shell Group, that raises both regulatory and economic stumbling blocks for a potential Chevron-Texaco merger. Complicated, Possibly Costly Through two US ventures, Texaco and Shell control about 15% of the US domestic gasoline market.

Analysts say that unwinding those ventures, or working around them,could be quite complicated and possibly costly. In addition, because Texaco already has combined its refining business with Shell, there are fewer efficiencies and fewer cost-cutting moves for it to make. Since 1936, Chevron and Texaco have operated a large refining venture called Caltex in Asia, Africa and the Middle East. Texaco, for example, has pared down its overhead so sharply that it is now seeking a tenant for 40% of its corporate headquarters. Chevron, meanwhile, has said it will cut costs by $500 million this year. Dominant on the West Coast Texaco's US downstream operations in the West and Midwest are run by Equilon Enterprises LLC, 44% owned by Texaco and 56% owned by Shell. Motiva Enterprises handles the Gulf Coast and Eastern operations and is about equally owned by Texaco, Saudi Refining Inc. and Shell.

Because Chevron is dominant in the West Coast retail market, with about a 20% share, Texaco would likely have to shed a big piece of its operation to meet federal antitrust approval, possiblyselling to its other partners at a discount. Texaco would have to mount a similar fire sale in the East, as Chevron is also a strong market player along the Gulf Coast. The Federal Trade Commission has been particularly concerned about gasoline-station concentrations in recent oil mergers and recently said it would look into a huge jump in gasoline prices on the West Coast, triggered by refinery shutdowns and fires.

A senior Texaco executive agreed with the concerns of analysts. "All of that makes sense," the executive said. In line with premiums largely because of its ventures, Texaco's retail operations are among the most profitable. By contrast, Chevron, with 8,000 US gas stations, has seen its refining and marketing business flag in recent years. In fact, about two years ago, Chevron's Derr hinted he might give up the business if he couldn't get it to perform better. Since then, Chevron has managed to cut costs and accident rates at its refineries, and profit has rebounded somewhat. Analysts say theprice under discussion is in line with premiums paid in other oil transactions.

At $80 a share, Chevron would be paying a 19% premium over Texaco's closing price of $67.25 on Friday, a day when Texaco's shares surged $5.0625, or about 8%, on rumors that the two companies were in talks. Chevron closed Friday at $94.875, down $2.9375. In some ways, a Chevron-Texaco merger is complementary. Chevron has a commanding presence in oil-exploration regions, including West Africa, the Caspian Sea region and Australia. In the Caspian Sea region, Chevron operates the giant Tengiz oil field, which, because of transportation problems, turns only a modest profit.