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Energy Investing For Dummies
Published:
September 10, 2013
Overview
The fast and easy way to grasp energy sectors and their place in the global economy
With timely, substantial information about energy stocks, Energy Investing For Dummies teaches the ins and outs of energy sectors and how to incorporate them into business and investment plans. As a savvy investor and business manager you will find the important information and advice you need to incorporate these growth areas into your investment portfolio.
In Energy Investing For Dummies, you'll find important information on the big-three markets of electricity, natural gas, and oil; growing markets for liquefied natural gas, emissions,
coal, and alternative energy; primers on advanced topics like storage, wheeling, load forecasting, and pipeline transportation; tips on investing in and trading energy stocks, ETFs, dividends, and derivatives; and much more.
- Includes examples of ways to invest in wind power, carbon emissions, thermal solar power, and other new markets
- Packed with the latest information on energy investing
- Shows you how to incorporate energy investing into your investment plans
Energy Investing For Dummies is your friendly, un-intimidating guide to this hot topic in business and investment trading.
Investing successfully in energy involves a lot of research into many different aspects of energy production and consumption. You can invest in commodities such as coal, oil, and natural gas, or you can purchase stock in an oil company or a company that builds natural gas power plants. You need to keep an eye on not only the energy markets but also the global economy and the news of the day.
About The Author
Nick Hodge is the founder of the Outsider Club, a community of retail investors looking to take personal control of their finances, and managing editor of Early Advantage, an investment advisory service that focuses on energy and resources. Jeff Siegel is an analyst and writer specializing in energy investing, with a focus on alternative and renewable energy. Christian DeHaemer is managing editor of the investment newsletter Crisis & Opportunity, and publishes a weekly column in Energy & Capital. Keith Kohl is the analyst and chief investment strategist for the investment advisories Energy Investor and Oil & Gas Trader.
Articles From The Book
3 results
Energy
Articles
There are many reasons to invest in energy and all its related sectors and companies. Energy is always in demand; its use is expected to grow; and investing in energy gives you opportunities to shape the future while earning income. But what, specifically, makes energy a fertile market for investment? The following list provides some insight.
Energy
Articles
As an energy investor, if you decide to leap into oil and natural gas futures, have identified the associated risks, meet all the qualifications, located the perfect broker to suit your needs, and are ready to start trading after doing all your due diligence, then there are just a few more questions to ask yourself before you begin.
Energy
Articles
Exchange-traded funds (ETFs) give energy investors a way to have broad exposure to an industry or sector. Instead of marrying your fortunes with one company, or buying five or six companies individually, you can diversify within a sector with one trade.
The only major coal ETF traded in the United States is the Market Vectors Coal ETF (NYSE: KOL), which is designed to replicate the performance of the Market Vectors Global Coal Index.
Energy
Articles
Energy investors should know that a master limited partnership (MLP) is a type of publicly traded investment vehicle. It combines the tax benefits of a limited partnership with the liquidity of a publicly traded company. If you like dividends, you’ll love MLPs because they pass a percentage of their profits directly to investors.
Energy
Articles
While 31 countries have reactors, the United States, France, and Japan have the most sound nuclear investment opportunities. These are also the countries where the bulk of nuclear electricity is generated. Companies based in these countries — like GE, Areva, and Hitachi — also provide planning and construction for many nuclear reactors in other countries.
Energy
Articles
The best way to manage all investment risks, including energy investments, is to make sure you do your due diligence — research all the angles of the investment you want to make before you make it. Don’t simply take an investment position because you heard about it on a finance show on TV or because you think everyone else is doing it.
Energy
Articles
You can get a sense of how a particular sector of the energy market is doing by monitoring an index that tracks the performance of several companies operating within it. For an investor, that's great information to have. Here are some of the most-watched indexes in the energy market:
Dow Jones U.S. Select Oil Equipment & Services Index
Dow Jones U.
Energy
Articles
Investing successfully in energy involves a lot of research into many different aspects of energy production and consumption. You can invest in commodities such as coal, oil, and natural gas, or you can purchase stock in an oil company or a company that builds natural gas power plants. You need to keep an eye on not only the energy markets but also the global economy and the news of the day.
Energy
Articles
As an energy investor, you should know that there is a dark side to burning coal in terms of pollution and climate change. The basic problem is that coal is much cheaper than other fossil fuels ($1 to $2 per MMBTU, compared to $6 or $12 for oil). It's also a heavier pollutant than its peers.
The good news is that the low cost of coal means that high-cost solutions to pollution and climate change can be adopted, and king coal will remain competitive as a global energy source.
Energy
Articles
Commodities are the raw materials that form the foundation of the energy market. The three classes of commodities are agricultural, energy, and metals. The bulk of these trades are made by consumers and producers of the commodity to manage price risk.
A utility that burns natural gas can use the commodities market to hedge against a future rise in price.
Energy
Articles
As an energy investor you should know that coal-burning power plants are on the wane in the United States. New legislation means that older plants will close, and some of the more modern ones will be further enhanced to reduce emissions. The trend is clear in the developed world. And it's anti-coal.
What is clean coal?
Energy
Articles
Energy investors should know that nuclear power is growing. Nuclear energy is used primarily for electricity. As with coal, nuclear demand is growing as people in places such as China and India want modern conveniences like turning the lights on and running the dishwasher.
In Malaysia, for example, the total number of households with television sets is expected to rise by more than 30 percent over the next ten years as the electric grid expands.
Energy
Articles
Equity is the surplus profit of a company that’s distributed among energy investors after the firm pays off all liabilities. When you buy a company’s stock, you’re buying a share of this equity. Buying shares of stock means you own a piece of the company.
Owning shares gives you a right to a portion of the profits and the firm’s assets in case of liquidation, as well as voting rights in the company.
Energy
Articles
As an energy investor, you have more than one way to achieve an investment goal. If you’ve ever heard people say, “Buy the Dow,” they’re referring to a fund that tracks the performance of the Dow Jones Industrial Average index.
Funds now exist that track almost any aspect of the market you can imagine. You can buy an oil service company fund, a wind energy fund, a coal fund, and so on.
Energy
Articles
Years ago, you could almost always depend on the seasonality of the natural gas market. Some energy investors swear by one rule: Buy low in the summer and sell high in the winter. They use a seasonal approach to trading natural gas.
Usually, the weakest time of year for natural gas demand was during the hot summer months.
Energy
Articles
If you are going to successfully invest in oil, simply knowing where the oil is and which countries are producing it isn’t enough information. You must also understand demand.
The United States is the world’s largest oil consumer by far, requiring 18.8 million barrels per day, nearly twice what it produces, leaving it still 50 percent reliant on imports.
Energy
Articles
To successfully invest in oil, you need to understand that the bulk of future demand is expected to come from developing countries, and you need to identify where the oil will be coming from to satiate that demand.
Saudi Arabia is the world’s largest producer and exporter of crude oil and a vital player in the global oil market.
Energy
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Energy investors need to understand how oil is classified. The terms conventional and unconventional simply relate to how the oil is produced. Whether conventional or unconventional, it’s all still crude oil. Variations in the oil’s makeup are what determine how it’s classified and sold.
Crude quality is measured in terms of density (light or heavy) and sulfur content (sweet or sour).
Energy
Articles
Okay, so maybe you want more bang for your buck. What energy investor doesn't? Then perhaps you'll consider the independent oil and gas stocks. It's the group of stocks that energy investors are most curious about, and a lot of major trading successes can be found here.
So what are they? Put simply, independent oil and gas stocks companies have no downstream activity.
Energy
Articles
An index is a measure of change in the value of a securities market. In energy investing, think of it as an imaginary portfolio of securities representing a certain market or specific sector of the market.
You’re probably already familiar with some indexes, like the Dow Jones Industrial Average or the Standard & Poor’s 500 (S&P 500), which are often cited as the broadest measures of the stock market.
Energy
Articles
As an energy investor, knowing what factors affect the short- and long-term success of the U.S. gas industry is a critical part of making successful decisions. Here’s a discussion of what drives natural gas demand.
Natural gas demand is generally perceived to be cyclical because of its relationship to heating.
Energy
Articles
Energy investors need to have a basic understanding of natural gas markets on both a regional and global scale. Natural gas is a composition of hydrocarbons formed from millions of years of pressure and heat in thick layers of silt, sand, and mud. It is odorless and tasteless, has no discernible color, and more important, is combustible.
Energy
Articles
Some would-be energy investors are hesitant to invest in the oil and gas industry because it is dominated by national oil companies (NOCs). An NOC is a company that’s owned — either wholly or through a majority stake — by a national government.
A few of the most recognizable names include Saudi Aramco, Gazprom, China National Petroleum Corporation (CNPC), Petróleos de Venezuela (PDVSA), Petróleos Mexicanos (Pemex), Oil and Natural Gas Corporation Limited (ONGC), Statoil, and Petróleo Brasileiro (Petrobras).
Energy
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Energy investors should know that long-term trends in the natural gas industry are primarily dependent on demand projections. Barring the short-term fluctuations, these projections tell you what to expect decades down the road. One of the best places to look for these growth trends are from regular reports of the U.
Energy
Articles
As an energy investor, before knowing where the world’s oil reserves are, you must first understand different types of reserve estimates and realize that they change constantly. The main categories of reserves you commonly see used are:
Proven (P90, 1P)
Proven developed (PD)
Proven undeveloped (PUD)
Unproven
Probable (P50, 2P)
Possible (P10, 3P)
The Society of Petroleum Engineers (SPE) provides the most widely accepted definitions of these terms.
Energy
Articles
When people think of energy investing, they usually first think of oil and the big dogs in the industry like ExxonMobil (NYSE: XOM) or BP Inc. (NYSE: BP). But what you may not know is that coal, though it may not be sexy, is one of the best energy investment vehicles in the world.
Total world coal production reached a record level of 7,678 million tonnes (Mt) in 2011, increasing by 6.
Energy
Articles
As an energy investor, you might want to know that one of the most attractive features of natural gas is that it’s the cleanest-burning fossil fuel. When you burn natural gas, it creates less carbon dioxide (CO2) emissions than both oil and coal. This table highlights the cleaner-burning benefits associated with natural gas.
Energy
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If you are going to invest in oil, it helps to understand its history. In 1890, Standard Oil was producing 88 percent of the refined oil in the United States. It controlled 91 percent of the market in 1904 after turning from a trust into a holding company that held stock in 41 other companies. Standard Oil had a full-fledged monopoly on the oil business.
Energy
Articles
When exchange-traded funds (ETFs) stepped onto the investment scene in the 1990s, nobody was happier than individual investors. This type of investment offers you the opportunity to diversify your portfolios like traditional mutual funds without some of the hassles.
An exchange-traded fund is an investment fund that can be traded on an exchange.
Energy
Articles
If you're interested in investing in coal, you should know that a highly charged debate about coal has been raging in the United States since Al Gore won an Oscar.
President Obama and his administration have pushed hard and generally succeeded in fulfilling his 2008 election promise to end the expansion of the coal industry in America.
Energy
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Energy investors need to understand that coal has two markets — the developed market represented by the United States and the developing market represented by India and China.
Burning coal in the United States is responsible for 37 percent of the country’s total carbon dioxide emissions. The use of coal is being gradually reduced both due to the low cost of natural gas — now abundant due to fracking — and measures taken by the EPA in response to President Obama’s efforts to clean the environment.
Energy
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Coal investors are interested in cleaner coal, but you should know that, in addition to burying or scrubbing coal emissions after the fuel is burned, there are other ways to make coal cleaner. By converting coal in a gaseous or liquid fuel, it can be used for much more than just boiling water to make steam.
Several publicly traded companies break apart and recombine coal molecules into their varying components.
Energy
Articles
Energy investors should know that the future of nuclear power in the world is one of growth, even if that growth is delayed due to the slowdown in the aftermath of the Fukushima disaster. Thirty countries worldwide are operating 437 nuclear reactors for electricity generation. This number is only 7 fewer than the record of 444 running reactors reached in 2002.
Energy
Articles
Energy investors need to know that, as opposed to other energy sources, there is an almost endless supply of coal. No one talks of “peak coal.” Therefore, coal isn’t affected by new finds, dwindling supply, or politics in the Middle East.
In this way, it’s the most honest of energy commodities. You buy at the bottom of the business cycle and sell at the top.
Energy
Articles
To make wise energy investments, you need to become familiar with the broader implications of oil import and export data. It’s not hard to see how production and consumption come together to form a global oil market. All you have to do is look at imports and exports. This data reveals how well a country is sating its own demand or, conversely, how much oil it has available for sale.
Energy
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Energy investors find that it is impossible to have a discussion about national oil companies (NOCs) without shining a light on OPEC. By the end of 2011, more than 80 percent of the world’s proven oil reserves rested in the hands of the 12-member oil cartel.
OPEC was created in the 1960s by five founding members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
Energy
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Because of its importance to the world oil market, energy investors need to understand how OPEC operates. More than half a century ago, in 1960 to be exact, a few oil-exporting countries decided to band together and form an organization. Today, you know these countries as the Organization of the Petroleum Exporting Countries, or OPEC.
Energy
Articles
For an energy investor, a margin is the minimal amount of money needed to trade a futures contract through your broker. Basically, the margin is in place to guarantee that you have the money to settle potential losses from a trade.
Unlike stocks, where you can sometimes trade on large margins (with a 50 percent margin, you can trade $10,000 worth of stock with only $5,000), futures contracts have a much lower margin, usually between 5 and 15 percent of the contract, that is enforced by the exchange.
Energy
Articles
Energy investors considering investing in nuclear energy should know about the ongoing debate of nuclear power plants. Many people have written many words about the benefits and costs of employing nuclear energy for both civilian and military purposes. Those of a certain age can remember the battle of the “No Nukes” versus “Know Nukes” bumper stickers.
Energy
Articles
It’s important to define energy, because it’s important to know the nature and scope of a market you’ll be putting your hard-earned dollars into. The Merriam-Webster Dictionary definition of energy breaks it down into several parts.
Energy
Has a dynamic quality
Is a vigorous exertion of power
Is a fundamental entity of nature that is transferred between parts of a system in the production of physical change within the system, and is usually regarded as the capacity for doing work
Is usable power (such as heat or electricity) or the resources for producing such power
For investment purposes, a combination of the third and fourth definitions is apt.
Energy
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For investment purposes, each source of energy is considered its own market sector. Fossil fuels — or, more precisely, nonrenewable fuels like oil, natural gas, coal, and nuclear — dominate global energy consumption, with a 92 percent market share. Renewable fuels like hydroelectricity, solar, wind, and biofuels account for just 8 percent.
Energy
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For energy investors to successfully trade oil and gas futures, understanding the basic drivers behind oil and gas prices is imperative. In a perfect world, a market’s fundamentals would revolve entirely around demand. That is, you have a buyer with a specific amount in mind, willing to pay a certain price.
Rarely, however, is that the case.
Energy
Articles
When people talk about investing, including energy investing, they’re almost always talking about going long, where the goal is to buy low and sell high. But you can also profit when the price of a security falls, known as being short, or shorting.
The idea is still to buy low and sell high, only you do it in reverse, selling shares you borrow at a high price, and then buying when the price falls, profiting from the difference.
Energy
Articles
You may not be an expert on geopolitics and how they relate to energy and natural resources, but you’ve definitely seen them in action. If you’ve heard of Russia threatening to cut off European access to natural gas, or read about Venezuelan oil, or seen headlines about Iran’s nuclear program or the Organization of the Petroleum Exporting Countries’ (OPEC’s) influence on oil prices, then you’ve witnessed how geopolitics influences energy.
Energy
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Global governments and organizations have a strong influence on the energy industry. You can see this influence in things like the United Nations’ Kyoto Protocol, which sets binding targets for industrialized countries to reduce emissions of greenhouse gases.
Nearly 200 countries have signed and ratified the Kyoto Protocol, and their efforts to curtail emissions dictate the types of energy they use and invest in.
Energy
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If you’re investing in energy, keeping the pulse of constantly evolving energy technologies is vital because they can cause price swings in energy commodities or make once-dominant companies obsolete. New natural gas drilling technologies, for example, have allowed levels of recovery in the United States not seen for decades.
Energy
Articles
For an investor trading in energy futures, choosing the right broker is a long and arduous process, and rarely will you find one early on in your search. You have a set of expectations, and the wrong choice can be costly to your portfolio.
All brokerage firms must be registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM) or an Introducing Broker (IB), and they have to be a member of the National Futures Association (NFA).
Energy
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Properly evaluating a future oil and gas investment is perhaps the most important skill you can learn as an investor. It can mean the difference between securing that nest egg for the future and losing your shirt because of a bad craps throw.
Instead of diving into the oil and natural gas industry and picking names out of a hat, properly assess a company’s current position to determine its future value.
Energy
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If you are interested in investing in government-owned oil and gas companies, the following is a list of oil and gas companies that are partially government-owned but that you can still trade on certain stock exchanges:
Petróleo Brasileiro: Petrobras, in which the Brazilian government owns a 64 percent stake, has approximately 11.
Energy
Articles
Energy investors should know that China is slowly working off stockpiles of coal that it built up during the Great Recession. But longer-term expansion of coal-powered plants in China and India will boost demand over the next three or four years. China’s power consumption is expected to increase by 8.5 percent in 2013, and it’s expected to add 75 gigawatts of coal-fired production in the next two years.
Energy
Articles
Energy investors should know that Russia produced 336.3 million tons of coal in 2011, which was 4 percent more than the prior year and a record for the post-Soviet era. Russia is the third-largest exporter of coal with 11 percent of the global market.
Despite the fact that 80 percent of its coal is located in Siberia, most of its coal (73 percent) goes to the European Union.
Energy
Articles
Energy investors should know that America is the country that made coal king. Coal from Southern and Midwestern states is what helped build the strongest economy in the world. Some of the companies that made that possible are still around and are still solid investments.
Here's a look at some of the major coal mining companies:
Peabody Energy (NYSE: BTU) is a large blue chip coal miner with a $5.
Energy
Articles
Energy commodity and stock prices change by the second. And the macroeconomic outlook can change just as quickly. What are crude oil prices doing today? What's the demand outlook for the next five or ten years? As an energy investor, you need updated answers to these questions and many more. The following websites are a good place to get current and reliable information:
Energy Information Administration (EIA): The most comprehensive collection of energy information anywhere, including reserve and pricing data, production rates, forecasts, and more.
Energy
Articles
Energy investors can think of trading futures as the transfer of risk from the producers (the ones doing the hedging) to the speculators. It’s the most effective way to mitigate price volatility because the standardized contracts are only bought and sold on regulated exchanges.
The New York Mercantile Exchange, or NYMEX, is home to the energy complex, and it’s where you find listed futures contracts for crude oil, gasoline, heating oil, and natural gas.
Energy
Articles
Energy investors can use coal funds to gain diversified exposure to the industry and generate income with a single purchase. Master limited partnerships (MLPs) own coal resources and lease them to mining companies, passing on the proceeds directly to investors. Exchange-traded funds (ETFs) track the combined performance of several companies whose main operations are in the coal sector.
Energy
Articles
You can trade coal futures on the New York Mercantile Exchange (NYMEX). NYMEX coal futures are quoted in dollars and cents per ton, and are traded in contracts of 1550 tons.
The coal futures contract tracks the price of the high-quality Central Appalachian coal (CAPP), or Big Sandy as it’s known in the pits because of the terminals where it’s delivered at the confluence of the Big Sandy and Ohio rivers.
Energy
Articles
After thumbing through the national oil companies (NOCs), you may feel as if nothing is left in the pot for energy investors. Fortunately, that isn’t the case. More and more, NOCs are migrating out of their domestic comfort zones into up-and-coming oil and gas hot spots.
Thanks to the development of unconventional oil and gas resources in North America, state-backed companies are making an appearance.
Energy
Articles
If you are interested in investing in coal, you should know that coal provides 27 percent of global primary energy, and it supplies more than 40 percent of the world’s electricity, as seen in the figure. It became this dominant because coal is so abundant, and it’s relatively cheap to build and operate coal-fired power plants compared to other fuel sources.
Energy
Articles
Investment management companies want to make money, and so do you. To achieve this goal, they create mutual funds with certain objectives. Like-minded energy investors who have the same goal as the fund pool their money together, giving control to a fund manager who's responsible for building a collective portfolio filled with investments that fall within the specific criteria, and voilà.
Energy
Articles
When an oil and gas company is involved in the entire process from exploration to distribution, it’s considered an integrated oil company. Energy investors (and everyone else) are likely to recognize these companies right from the get-go, and for good reason.
Why? Well, it’s because they’re the most visible face of the oil industry.
Energy
Articles
Like all the energy fuels you can invest in — oil, gas, and coal — uranium can be traded as a commodity. Uranium, though, is primarily used for one thing, as opposed to the many end uses for other energy commodities. As such, its price is determined by the balance of supply and demand in the nuclear fuel market.
Energy
Articles
The laws of nations, states, and local entities have a great impact on the movement of energy markets. They address every aspect of the industry, including
Energy consumption
Energy distribution
Energy production
And they do it through
Conservation guidelines
Incentives
International treaties
Legislation
Subsidies
Taxation
Every country, and even every U.
Energy
Articles
Although thousands of mutual funds are floating out there, the following are among the top-ranked energy equity funds available, using a combination of ratings from multiple agencies.
Those ratings take into account risk-adjusted historical returns, the fundamentals of the underlying holdings of a fund, tax efficiency, and other factors.
Energy
Articles
If you’re looking to invest in natural gas, you should understand how natural gas is transported. Before liquefied natural gas (LNG) could be viably shipped, the natural gas industry was tied down to regional markets. It all boils down to how the resource is transported. Unlike crude oil, which can be shipped via freight, tanker, pipeline, and even trucks, the overwhelming amount of natural gas is supplied by pipeline.
Energy
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A new discovery in northern Saskatchewan, Canada could quickly become one of the top ten uranium deposits in the world. MacArthur River, also located in Saskatchewan, is widely agreed to be the largest deposit, containing high grades of uranium totaling about 324 million pounds.
This new discovery, called Patterson Lake South, has only had a few holes drilled and is already shown to contain around 50 million pounds of uranium at high grade.
Energy
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Understanding which countries are the largest producers is part of the foundational knowledge you need to invest in oil. Everyone knows a bird in the hand is worth two in the bush. And that proverb applies to oil, too. Just because a country has oil doesn’t mean it can or will viably produce it. This table lists the countries that producer the most oil.
Energy
Articles
The following are among the top-ranked exchange-traded funds (ETFs) available, using a combination of ratings from multiple agencies. The expense ratios associated with ETFs included in the list of oil and gas sector ETFs are much lower than those associated with mutual funds.
Name: Energy Select Sector SPDR FundTicker: XLEFund start date: December 16, 1999Category: Equity EnergyTotal assets: $8 billionExpense ratio: 0.
Energy
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Let’s face it: Energy outlooks vary greatly for investors. You can utilize commodity exchange-traded funds (ETFs) and take advantage of broad trends in commodity prices. A commodity ETF is an exchange-traded fund whose goal is to mirror the performance of a physical commodity like crude oil. Some commodity ETFs are also designed to leverage investors against price declines.
Energy
Articles
When you’re ready to make your first energy investment, you need to get familiar with some important terms. A stock quote is made up of the name of the company or fund, the ticker symbol, open price, bid and ask prices, current price, and volume. This table shows all this information for ExxonMobil at a random moment in time.
Energy
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As an energy investor, to buy stocks, bonds, options, and mutual and exchange-traded funds, you need a brokerage account. This can be a full-service brokerage that offers you investment advice and can fully manage your account, or it can be a discount brokerage that charges you a commission for trades you execute on your own.
Energy
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Even bad situations can mean profits for energy investors. As major oil fields decline in production, investors can profit by investing in crude prices and in oil companies with lower production costs.
The importance of major oil fields can’t be overstated. Half of all oil produced comes from just 0.03 percent of all oil fields.
Energy
Articles
Energy investors should know that oil supply and demand is constantly walking a tightrope. In fact, according to the U.S. Energy Information Administration (EIA), the world consumed more oil than it produced in 2011. Oil production totaled 87.1 million barrels per day, which was slightly less than consumption, which totaled 87.
Energy
Articles
While the use of coal as an energy source may be on the decline in the United States, Canada, and other parts of the Western World, it's growing like gangbusters in Asia.
If you aren't careful, geographically-biased news will blind you to one of the biggest developments underway in the energy sector, because news coverage in the Americas and Europe virtually ignore what's happening in the rest of the world with regards to energy production and use.
Energy
Articles
Energy investors don’t need a crystal ball to see the fundamental shift taking place in the North American natural gas industry. In a relatively short period of time, North America has increasingly relied on unconventional sources to meet demand.
To judge how significant a role unconventional natural gas sources are playing, look no further than the U.
Energy
Articles
Not all crude is created equal. The most basic division is between conventional and unconventional oil. As you invest in oil companies, you want to know what kind of oil they produce and what the related costs are. Conventional oil costs much less to produce than unconventional, so companies producing conventional oil have a much higher profit margin.
Energy
Articles
One reason natural gas investment prospects are better in North America than the rest of the world is that fracking (hydraulic fracturing of rock) is causing a bona fide natural gas boom right now.
Most natural gas production in the United States comes from shale and tight gas; these are reserves of natural gas trapped deep in shale and sedimentary rock that are too hard to drill through.
Energy
Articles
If you acknowledge and mitigate the risks, energy investing can be very rewarding on multiple levels. Profits are typically the prime motivator, of course, but putting your dollars into energy markets can bring other rewards.
Reaping above-average returns
Because of the constantly rising demand for energy and the criticality of increasing supply, energy investments typically outperform the broader market.
Energy
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Energy investors should exercise extreme caution when investing in foreign governments. A national oil company is an oil company owned by a national government. Although a few of them are traded publicly, the majority stake is owned by the government, and you can bet they’re the ones calling the shots.
This table shows you a list of the 20 largest oil and gas companies by reserves.
Energy
Articles
In the great game of coal investing, knowing what moves a stock price can be the difference between retiring early and being stuck in a losing stock for years. One of the worst feelings for a commodity investor is being stuck in a stock because you know it’s too late to sell. But it happens even to the best investors.
Energy
Articles
You've likely heard about the highly controversial subject of hydraulic fracturing — referred to as fracking by today's media — at one point or another within the last few years.
But contrary to popular belief, it's only fairly recently that the fractious row began over this drilling technique. Hydraulic fracturing has actually been around for over six decades.
Energy
Articles
Oil and natural gas present many different ways to invest beyond just the Exxons and BPs of the world. Trading energy futures is one such opportunity. So what exactly does futures trading entail?
This is one of those cases where it sounds exactly like it is: Futures are simply an investment instrument whereby someone agrees to buy or sell a specific amount of units for a specific price with a set delivery date in the future.
Energy
Articles
If you're interested in trading energy commodities (such as coil, oil, or natural gas) you'll need at least one of the following persons working for you depending on if you are making the decisions or you want to yield to a professional energy investor:
Futures Commission Merchant (FCM): An FCM can solicit and accept, buy, or sell orders for commodity futures and options.
Energy
Articles
As an energy investor, if you want to find one wild card in the oil industry that can swing crude prices, geopolitical volatility is by far the most unnerving, unpredictable force out there. Some reports have suggested that conflict in the Middle East adds a $20 to $30 premium to crude oil prices.
To understand why, remember that disruptions in areas like the Strait of Hormuz can have a major impact on the petroleum trade.
Energy
Articles
Renewable energy stocks are on the mend, particularly in the solar space. After a few years of margin erosion, supply gluts, and hostile trade negotiations, solar investors who picked up cheap solar shares towards the end of 2012 are sitting on a mountain of profits today. But the question is, will it last?
The answer is yes.