Energy

Energy companies dig oil and gas out of the ground, refine it into fuels and chemicals, and sell it. A smaller, faster-growing slice builds solar panels, wind turbines, and the grid that connects them.

Every economy runs on energy. When growth picks up, demand picks up; when growth slows, so does energy. That's why oil prices and the stock market often move together.

Oil moves through a chain: drilling it out of the ground, transporting it through pipelines or tankers, refining it into gasoline, diesel, and jet fuel, then selling it at gas stations or to industry.

Different companies specialize in different links. "Integrated" majors like ExxonMobil and Chevron do all of them. "Pure-play" producers only drill. "Midstream" companies only move the stuff.

Mostly from selling oil, gas, and refined fuels at whatever the global market price happens to be that day. When oil is at $100, energy companies print money. At $40, many lose it.

Renewables work differently — utilities sign 10-20 year contracts at fixed prices. Steadier income, but smaller upside than a barrel of oil at $150.

Oil prices are set globally and depend on supply (OPEC, US shale, sanctions, war) and demand (the economy, the weather, technology). A handful of decisions in Saudi Arabia or the White House can move the price 30% in a month.

Energy stocks ride those swings. In the best years they outperform every other sector. In the worst, they're cut in half.

Oil and gas companies generate huge cash flows today but face a long-term wind-down as the world electrifies.

Renewable energy companies (solar, wind, grid) are growing faster but most don't yet print the cash that oil majors do. Many long-term investors hold both.

Oil price crashes (2014, 2020). Geopolitics — wars, OPEC decisions, sanctions. Climate regulation that makes drilling more expensive or restricts where it can happen. And the long-term trend of electrification eating into demand for gasoline.

On the upside, the energy transition itself is a multi-decade build-out. Whoever supplies copper, lithium, grid equipment, and storage will be busy for a long time.