Crude oil prices peaked in April 2024, as did investment sentiment towards energy stocks. Energy stocks were at the top of the Standard & Poor’s 500 Index industry sector rankings during the early months of last year before collapsing with late spring’s drop in oil prices.
For the second half of 2024, energy investments were shunned as OPEC+ struggled to keep oil prices from falling to decade lows among weak global oil demand and surging output from the U.S. and other non-OPEC producers. Promises of higher oil demand and less supply that would lift prices failed to entice investors into purchasing energy company shares.
Mother Nature altered energy dynamics with an early blast of cold temperatures that led Americans and Europeans to turn on their heaters, causing petroleum supplies in North America and Western Europe to drop. Dwindling energy supplies boosted prices and stimulated investors to revisit petroleum company fundamentals – solid balance sheets, limited capital investment, sustained production, and increasing investor returns via dividends and share repurchases.
Turning the calendar allowed industry participants and investors to reassess the near-term and long-term outlook for petroleum companies. Will the use of oil and gas end soon, or not for decades? The cold weather has highlighted some of the shortcomings of renewable energy. The inability of renewable energy to deliver power when people need it means hydrocarbon fuels must provide the missing energy. Hydrocarbon energy has ameliorated human suffering. For the past two centuries, it has delivered improved living standards to billions of people, but hundreds of millions need access to cheap and reliable energy.
Critics of hydrocarbon energy often fail to credit it for contributing to agricultural growth and greater food stocks. Moreover, hydrocarbon energy has aided human longevity, freed women from tedious and dangerous household chores, and provided tools for helping educate our youth. It provides the building blocks for our clothes, medicines, transportation, and every device needed by renewable energy.
Energy companies have and continue to reduce climate-damaging emissions. That effort must continue. The industry also must discover and develop new hydrocarbon resources to meet the world’s growing energy demand. Life will be better with more rather than less hydrocarbon energy. Investors seem excited by higher oil prices and energy's improving outlook.