The price of gasoline has been falling steadily for two months and with it many oil and natural gas stocks. Gasoline, of course, is not the only fuel produced from crude oil, but it is the most important, and the fortunes of many stocks depend on price. However, for those who want to avoid the volatility of gasoline prices, it is possible to build a portfolio that is less sensitive to price changes.
Barron’s looked at energy stocks in the S&P 500 that have risen since June 14, the day average U.S. gasoline prices peaked at an average of $5.02 a gallon, according to AAA. Since then, gas has dropped to $3.92.
Energy markets have traded in unique patterns this year. The historic relationship between oil and gas has broken down. A global shortage of natural gas sent the price of the commodity soaring to its highest level in a decade, even as oil prices fell again. In general, companies that focus on producing or transporting natural gas outperform those that focus on oil.
Since the peak of gasoline prices, companies that are less sensitive to underlying commodity prices have outperformed those that are more directly dependent on strong prices.
|Company / Ticker||Recent price||Market value (billion)||Price change*||Dividend yield|
|Kinder Morgan / KMI||$18.69||$43||5.8%||6.8%|
|ONEOK / OKE||63.87||29||6.5||6.4|
|Occidental Petroleum / OXY||64.86||60||4.5||0.1|
|Williams Companies / WMB||34.98||43||9.0||6.3|
*From June 14, 2022
The top performers were mostly companies that operate pipelines and other energy infrastructure, some of which make money under long-term contracts. They also have high dividend yields, giving them greater stability during periods of price volatility. That includes
Some analysts say the companies have regained investor confidence because of their steady dividends.
“In recent quarters, the midstream has made significant progress in rebuilding a history of rising payouts,” wrote Stacey Morris, head of energy research at VettaFi. “Names that cut their dividends during the energy market volatility and pandemic-related uncertainty of 2020 have largely returned to growth.”
High demand for natural gas is clearly helping some of the pipeline’s operators. In its latest earnings call, Williams Companies CEO Alan Armstrong said he sees little sign of gas demand slowing and that Williams is “the most gas-focused of the major midstream companies.”
“This demand growth continues to grow in the face of higher natural gas prices, which speaks to continued inelastic demand for natural gas, both here and abroad, and the fact that natural gas remains a bargain over alternative fuels “, he said.
( OXY ) produces both natural gas and oil and is a favorite of Warren Buffett, which may have helped the stock rise in recent months as he bought more.
now owns more than 20% of Occidental.
Write to Avi Salzman at email@example.com