Many other articles on this site have extolled the benefits of investing in energy firms of all size ranging from Big Oil like ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) to promising small caps like Mondial Ventures (OTN: MNVND).
The current crisis in the Ukraine is proving the value of that advice.
United States Oil (NYSE: USO), the exchange traded fund for oil, is up nearly 2 percent for the week. Chevron is also up for the week. So is United States Natural Gas (NYSE: UNG), the exchange traded fund for natural gas.
Oil securities are rising as Russia is a major producer, so there are concerns about its output. In addition, global tension will always drive the price of oil higher. That results from the investor fear that shipping lanes could be cut off or production fields shut down by attacks.
As a result, in the short term, oil prices will rise due to turmoil that impacts the supply.
But the long term outlook is bullish for oil and natural gas stocks, too. Even after the situation in the Ukraine cools down, the global demand for oil will increase due to growth around the world. Oil is the most widely used fuel source in the world, according to the International Energy Agency in its “World Energy Outlook 2013.” Demand for it will grow in the years ahead. But the International Energy Agency projects the need for natural gas rising even more than that for oil.
That is due to natural gas being a cleaner burn.
Major coal users such as China and India have vowed to decrease their reliance on it as it is very dirty. The logical choice is natural gas, as alternative energy does not have the yield to meet mass demand. A recent article in The Wall Street Journal , “The $2.2 Billion Bird-Scorching Solar Project” reported on how a solar power plant in California costs more than four times as much as a natural gas facility. It was also less effective and required much more land. A previous piece on this site detailed how institutional investors, the proverbial “smart money,” are now leaving alternative energy projects for oil and natural gas holdings due to the promising outlook.
In addition to the demand for oil and natural increasing in the future, so will the dividend amounts, based on history.
Big Oil stocks have big dividend incomes. The average dividend for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is just under 2 percent. For Chevron, the dividend yield is 3.49 percent. ExxonMobil has a dividend yield of 2.64 percent. Total SA (NYSE: TOT), a French oil giant, has a dividend yield of over 5 percent.
For growth and value investors, small caps like Mondial Ventures will be most attractive. The company operates in the legendary oil field of Texas, which gives it tremendous potential. ExxonMobil, Chevron, Total SA, and other major oil firms will have slow, but steady growth in the years ahead. But for investors of all types, there is something in the oil and natural gas sector with a bullish future, as shown by what is happening now in the Ukraine.
Are you invested in the oil and natural gas sector?