By Ben Stone, Financial Newsletter
Over the past few years, the possibility of a potentially devastating global energy crisis has increased.
With increasing global energy demand, geopolitical tension in major oil-producing countries and the world’s continued reliance on fossil fuels, the world was already on the brink of an energy crisis…
And that was before Russia invaded Ukraine in February 2022.
Russia’s invasion of Ukraine is certain to have long-lasting effects on energy supply and markets all over the globe.
In fact, the International Energy Agency (IEA) said that the world faces its first “truly global energy crisis” as a result.
The IEA’s report stated, “With unrelenting geopolitical and economic concerns, energy markets remain extremely vulnerable, and the crisis is a reminder of the fragility and unsustainability of the current global energy system.”[i]
Global investment firm T. Rowe Price recently warned: “fossil fuels will continue to play a vital role for some time to come. The short‑term story is therefore one of elevated prices and heightened volatility as countries scramble to identify alternative sources of gas. This will come at a huge cost as governments deal with rising prices while simultaneously subsidizing their populations’ energy bills.”[ii]
While this energy crisis will likely have a meaningful impact on consumers – and in particular consumers in lower-income groups – it does trigger an opportunity for investors.
It’s not only possible to survive the coming energy crisis without taking a hit to your portfolio…
It’s actually possible to thrive in this environment as demand for oil is likely to remain strong for the next several years. This means that a handful of carefully-selected investments have the potential to perform exceptionally well in the months ahead.
What follows is a list of 3 energy investments that appear well positioned to help investors survive and thrive during the coming energy crisis.
Please be sure to do your own due diligence and research any potential investment carefully before making any investment decision.
Energy Crisis Stock #1 – Valero Energy Corporation (NYSE: VLO)
Valero Energy Corporation (NYSE: VLO) is one of the world’s leading oil refinery companies, primarily turning crude oil into finished products like gasoline, diesel fuel, kerosene and others.
The company manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally.
Valero Energy Corp. operates through three segments: Refining, Renewable Diesel, and Ethanol.
It produces California Reformulated Gasoline Blendstock for Oxygenate Blending and Conventional Blendstock for Oxygenate Blending gasolines, CARB diesel, diesel, jet fuel, and asphalt; and sulfur crude oils, as well as propane, naphthenic base oil, solvents and aromatics, benzene, toluene and mixed xylenes, natural gas liquids, and petroleum coke.
The company sells its refined products through wholesale rack and bulk markets; and through approximately 7,000 outlets under the Valero, Beacon, Diamond Shamrock, Shamrock, Ultramar, and Texaco brands. The company also produces and sells ethanol, dry distiller grains, syrup, and inedible corn oil primarily to animal feed customers.
In addition, it owns and operates crude oil and refined petroleum products pipelines, terminals, tanks, marine docks, truck rack bays, and other logistics assets; and owns and operates a plant that processes animal fats, used cooking oils, and inedible distillers corn oils.
Thanks to tight global supply – due to refinery shutdowns – and higher demand worldwide, the company posted revenue 16.3% higher than the prior-year quarter in 4Q22. And the prospects for the short and medium-term future for the company continue to look excellent.
Energy Crisis Stock #2 – Helmerich & Payne, Inc. (NYSE: HP)
Helmerich & Payne, Inc. (NYSE: HP) provides drilling services and solutions for oil exploration and production companies. It is the market leader in the U.S. – with a market cap of $4.8 billion – and operates through three segments: North America Solutions, Offshore Gulf of Mexico and International Solutions.
The severe drop in oil consumption due to the pandemic caused the company to see a severe downturn in 2020, but oil consumption is now poised to climb to new all-time highs this year.
The strict sanctions many European countries have imposed on Russia, along with dramatic production cutbacks from many OPEC nations, mean that the U.S. oil market is now being turned to in order to make up for these lost barrels.
And that provides significant tailwind for Helmerich & Payne in terms of increased U.S. drilling activity. The company’s innovative drilling technology and highly skilled workforce have helped it establish and maintain a leading position in the drilling industry.
In addition, the company’s technologically advanced FlexRigs are in heavy demand throughout the industry. The FlexRig fleet’s superior technology means there is minimal idle time for each drill rig because it moves quickly from one contracted customer to the next, providing significant cost savings.
Energy Crisis Stock #3 – Albemarle Corporation (NYSE: ALB)
Albemarle Corporation (NYSE: ALB) develops, manufactures, and markets engineered specialty chemicals worldwide. It operates through three segments: Lithium, Bromine, and Catalysts.
One of the impacts of the global energy crisis is that it will strengthen the push – from both the public and private sector – for increased investment in electric vehicles.
This, in turn, will mean a stronger push for additional investment in lithium production in order to meet the growing demand for the batteries to power these new EVs.
2022 saw a historic surge in demand for electric vehicles, with 7.8 million EVs sold worldwide – an increase of 68% from 2021 – according to the Wall Street Journal.[i] [ii]
This explosion in demand for electric vehicles – and the resources needed to power them – has caused lithium prices to soar to record heights.
The company has already been a key beneficiary of lithium’s massive supply and demand imbalance. Accordingly, with the company increasing lithium production, coupled with higher realized price, margins are set to really take off.
Albemarle Corporation represents a unique opportunity for investors to take advantage of the growing momentum toward EVs and increasing worldwide demand needed for the lithium batteries that power them.
* Note: management cautions that potential lithium resources that exist on properties outside of the PegaLith claims are not direct indicators of lithium mineralization on the PegaLith property.
[i] https://www.businessinsider.com/electric-vehicles-accounted-global-auto-sales-could-quadruple-2030-report-2023-1
[ii] https://www.wsj.com/articles/evs-made-up-10-of-all-new-cars-sold-last-year-11673818385?mod=hp_lead_pos2
[i] https://www.bbc.com/news/business-63400384
[ii] https://www.troweprice.com/personal-investing/resources/insights/energy-crisis-only-just-beginning.html
