While the range of options may seem intimidating at first glance, the variety is an advantage for investors because it offers many ways to diversify energy investments in the U.S. market, which is dominated by two integrated titans, Exxon Mobil and Chevron.
Still, investing in the oil and gas industry is not for everyone, especially these days. Some people object to putting money into the fossil fuel industry. Even if that isn’t an issue for you, energy has historically been a volatile industry, with astounding booms and devastating busts. Through March, the S&P Composite 1500 Energy Index rose 72 percent since the end of October, a period during which the Food and Drug Administration approved the first Covid-19 vaccine and President Biden’s election raised expectations of additional economic stimulus.
“It is not unusual to see cyclicals rally like this coming out of a recovery, and it makes sense now,” Chris Stuart, senior investment research analyst at the Commonwealth Financial Network in Waltham, Mass., said. “We are starting to see increased mobility across the U.S. More people are driving, more people are flying and so the demand part of the equation is most certainly improving, and the stocks are pricing in a sustained demand recovery.”
But these are unusual times for energy investing. The S&P energy index retreated 5 percent from March 17 to March 31, after the International Energy Agency forecast that oil consumption was not likely to return to prepandemic levels in developed economies.
“World oil markets are rebalancing after the Covid-19 crisis spurred an unprecedented collapse in demand in 2020, but they may never return to ‘normal,’” the I.E.A. said in its “Oil 2021” report. “Rapid changes in behavior from the pandemic and a stronger drive by governments toward a low-carbon future have caused a dramatic downward shift in expectations for oil demand over the next six years.”