The price of gasoline has been falling steadily for two months, and so have many oil and gas stocks. Gasoline, of course, is not the only fuel derived from crude oil, but it is the most prominent, and the fortunes of many stocks depend on price. Still, for those who want to avoid the volatility of gasoline prices, it is possible to build a portfolio that is less sensitive to changes in prices.
Barron’s was examined for energy reserves in
Which has risen since June 14, the day that average US gasoline prices averaged $5.02 per gallon, according to AAA. Gasoline has since fallen to $3.92.
Energy markets have traded in a unique pattern this year. The historical relationship between oil and natural gas has been broken. A global natural gas shortage has pushed the price of that commodity to its highest level in a decade, even as oil prices continue to slide. In general, companies focused on producing or transporting natural gas have performed better than those focused on oil.
Since the peak in gasoline prices, companies that are less sensitive to underlying commodity prices have outperformed those directly dependent on stronger prices.
|company / ticker||recent price||Market Value (Bill)||price change*||dividend yield|
|Kinder Morgan / KMI||$18.69||$43||5.8%||6.8%|
|oneok / ok||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-performing companies are mostly those operating pipelines and other energy infrastructure, some of which make money on the basis of long-term contracts. They also have higher dividend yields, which gives them greater stability in times of price volatility. which consists of
(OKE) and Williams Companies (WMB).
Some analysts say the companies have won investor confidence because of their steady dividends.
“In recent quarters, Midstream has made significant progress in rebuilding its track record of growing payments,” wrote Stacy Morris, head of energy research at Waitafi. “Names that cut their dividends during the uncertainty related to the energy market volatility and the 2020 pandemic have largely returned to growth.”
The high demand for natural gas is clearly helping some pipeline operators. On his latest earnings call, Williams Company CEO Alan Armstrong said he sees little sign of slowing natural gas demand and that Williams is “the most natural gas-focused of the large-scale midstream companies.”
“This demand growth continues to be driven by higher natural gas prices, which continue to decrease demand for natural gas here and abroad, and the fact that natural gas remains a bargain versus alternative fuel,” 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 it has bought more.
Occidental now owns over 20%.
Write to Avi Salzman at email@example.com