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These Stocks And Oil Billionaires Are Profiting From The Surge In Energy Prices

Topline

As the surge in oil prices continues amid increasing demand and a supply crunch that has driven up prices for all types of fuels, energy stocks are soaring—in some cases, notching triple-digit returns—while several U.S. oil tycoons watch their net worths spike.

Key Facts

With tight global supply and strong pent up demand worldwide as countries recover from the pandemic, oil prices remain near seven-year highs of around $85 a barrel, with the cost of the U.S. benchmark crude rising around 70% so far this year.

The surge in oil prices is part of a global energy crunch which has increased prices for all types of fuels: Gasoline is more costly in the U.S. than any time since 2014, the price of natural gas has more than doubled this year and even coal has exploded—with countries like China and India ramping up production as fast as possible.

Earlier this week, the SPDR Oil & Gas Exploration & Production Fund, which tracks the energy sector, hit its highest level since June 2019 and is up more than 80% so far in 2021.  

Amid the blistering rally, shares of oil companies have skyrocketed higher this year, with most notching double-digit returns including Chevron (up 33%), Exxon Mobil (up 55%), Hess (up 58%), ConocoPhillips (up 89%), Occidental Petroleum (up 92%) and Diamondback Energy (up 122%). 

Several U.S. oil tycoons have seen their wealth jump as a result: Fracking pioneer Harold Hamm, whose Continental Resources is one of the nation’s biggest independent oil companies, is now worth $15.8 billion—up from $9.4 billion just six months ago, by Forbes’ estimates.

George Kaiser, who leads the Kaiser-Francis Oil Company, is worth $10.5 billion from $5.8 billion six months ago, according to Forbes, while Jeffrey Hildebrand of Hilcorp (America’s largest privately owned oil company by production volumes) has seen his fortune triple over to $6 billion.

Key Background:

The tides have really turned since last year when oil prices briefly fell below $0 per barrel in April 2020, as demand plummeted and companies ran out of storage tanks to put fuel that nobody was using. As countries continue to recover from pandemic-induced economic slumps, however, the demand for oil has risen faster than producers can ramp up supply. Making matters worse are shortages in coal and natural gas which are sending the price of oil up even further. 

What To Watch For:

The price of oil could keep climbing. After OPEC opted against ramping up oil production earlier this month, analysts at Bank of America predicted that crude oil prices would climb above $100 per barrel. Analysts at Goldman Sachs recently estimated that global oil demand had almost entirely recovered from last year’s pandemic-induced collapse and would “shortly” hit its pre-pandemic peak. The firm now predicts that oil could average $85 per barrel for at least the next few years.

Tangent:

Looking further ahead, global efforts to focus on climate change have appeared to create a substantial long-term mismatch between oil supply and demand. With Big Oil constantly finding itself in the crosshairs, the industry has tried to shrink oil production and instead invest in renewable energy—even at the cost of lower margins. The International Energy Agency recently found in a new report, however, that for countries like the U.S. to slash carbon emissions by 2050, oil usage must peak by 2025. The kicker: Based on current investments, green power generation won’t be enough to supplant oil consumption until at least 2035.

Further Reading:

Energy Crisis 2021: How Bad Is It, And How Long Will It Last? (Forbes)

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