Natural gas is turning out to be one of the more popular petroleum fuels in the world right now. This is because when compared to gasoline, diesel, or kerosene, natural gas produces far less carbon dioxide and few other pollutants such as sulfur dioxide. This is part of the reason why the U.S. has shifted its energy production to natural gas to reduce emissions while still exploiting the energy generation potential of petroleum products.
While petroleum was still the largest, it was used mostly for transportation purposes, as natural gas was the dominant fuel of choice in residential, industrial, and commercial use cases. Within the electricity sector, natural gas also led the pack and accounted for 32% of the total usage, and overall, natural gas accounted for 36% of the U.S. primary energy production. Finally, U.S. natural gas production also outstripped usage in 2021.
The top-performing oil and gas stocks in the past year include TORM PLC, Teekay Tankers, and Scorpio Tankers. Despite oil prices dropping significantly from their peaks recorded nearly a year ago, these companies have seen their shares rise by well over 100% in the past year, handily beating the 9% drop in the Russell 1000 Index.
Oil and gas stocks as a group, measured by the benchmark Energy Select Sector SPDR ETF (XLE), have climbed by 10% in the past year, outperforming the broader market. However, declining oil and gas prices could pressure margins and revenues in the sector.
Inflation/Interest Rates Hedge: Historically, rising inflation has been correlated with higher oil prices, offering investors a potential portfolio hedge by investing in oil and gas stocks. Over multiple rate-tightening cycles, WTI crude contracts have often risen months after rate hikes.
Tax Advantages: Oil and gas investments can offer unique tax benefits, including treatment differences between royalty income and certain deductible costs (depending on jurisdiction and investor profile).
Note: Energy markets can be highly sensitive to geopolitics, supply shocks, and macroeconomic changes. Always manage risk and avoid overexposure.
Finally, the global natural gas market was estimated to be worth $955 billion in 2022 and will grow at a compounded annual growth rate (CAGR) of 7.3% this year to be worth a little over $1 trillion by the end of 2023. From 2023 until 2027, the industry is expected to exhibit a CAGR of 7.5% and be worth $1.3 trillion. Some of the top profitable natural gas companies part of our list today are Public Joint Stock Company Gazprom, Coterra Energy Inc., and Tourmaline Oil Corp.
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