Big oil takes a beating, but its investors are riding high

Consider some recent performance statistics.

This year, six of the top 10 energy companies in the S&P 500 are led by Marathon Oil, which grew 88 percent in 2021 alone. Companies in the S&P 500’s energy sector have outperformed any other broad market slice — up 37 percent in 2021, compared to nearly 11 percent for the overall stock market benchmark.

Stock returns for large energy companies have been excellent, despite public thrashing, driven by oil price increases. Here are some representative price increases for 2021, expressed in percentages:

The price of crude oil in the United States has risen above $70 a barrel, its highest level in three years. Oil, in turn, has pushed the price of regular gasoline at the pump above $3 per gallon, a nearly 40 percent increase for the year, according to AAA.

The main short-term reason for the rising price trend for the energy sector is the classic one: a simple imbalance of supply and demand.

“Some of it just happens to the energy market when the economy grows after a recession,” he said. ed crooks, vice president of energy in America for the research firm Wood Mackenzie.

Demand has skyrocketed as the economy wakes up from its pandemic slumber.

At the same time, the supply of oil has been limited by the decline in production recession, when people stopped driving and flying and major oil companies lost billions of dollars and started layoffs. Supply has also been tightened by restraints imposed by the Organization of the Petroleum Exporting Countries and a group called OPEC Plus made up of affiliated producers such as Russia. OPEC Plus has already done announced That its members are starting to increase production slightly, which could prevent prices from rising further.

But the long-term supply-demand position is more ambiguous.

At some point, if you accept that the planet is warming – that is, if you accept the judgment of the science contained in the International Energy Agency report – the extraction of large amounts of carbon will have to stop. Public pressure on large oil companies may be a harbinger of declining fossil fuel production. The prospect of bottlenecks on future supply is weighing on the market and may have a marginal impact on prices, Mr Crook said. Oil markets have always been tied into geopolitics, but there may be more in the next decade.

Companies based in Europe, such as anise, complete and bp, After Shell, Americans are moving faster than companies towards a future of alternative energy and low carbon emissions Conoco Philips, Chevron and Axon, a . According to new study By Carbon Tracker, an independent think tank.

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