Energy

The energy sector encompasses companies involved in the production, transportation, and distribution of energy that powers the global economy.

While historically centered around oil and gas, the sector now includes renewables (solar, wind, biofuels), power generation, and utilities, reflecting the growing energy transition.

Key subsectors include upstream exploration & production (E&P), midstream pipeline and transport, downstream refining and petrochemicals, as well as renewable energy and power & utility companies.

Though this primer focuses on oil and gas due to its dominant role in energy finance, a broader understanding of the full energy spectrum is becoming increasingly important. 

Oil & Natural Gas (Fossil Fuels) are naturally occurring organic compound comprised of hydrogen and carbon (hydrocarbons).

Oil and gas is the globe's primary source of energy and integral to everyday life.

Oil is most commonly associated with gasoline while natural gas is used to heat homes and generate electricity.

Outside of energy, petroleum is also used to create everyday products such asphalt, plastics, tires, lubricants, and much more.

When oil is pulled out of the ground, it is referred to as crude oil (unrefined). Crude oil pricing is what people refer to when talking about "oil prices"

The two major benchmarks for crude prices are West Texas Intermediate (WTI), which is extracted from the United States and Brent from Europe (North Sea)

Crude oil is unusable and needs to be refined into various forms such as gasoline, kerosene, jet fuel, and more.

Global Production Levels: Increases/decreases in output from major producers like OPEC, the U.S., or Russia significantly impacts global supply and pricing

Seasonal/Regional Demand: Demand fluctuates with seasons (heating oil in winter, gasoline in summer) and is affected by weather and industrial activity.

Conflict/Instability: Tensions in key producing regions (Middle East, Russia/Ukraine) can disrupt supply chains and trigger price spikes due to uncertainty.

OPEC+ Decisions: The coordinated production targets set by OPEC and allied countries can tighten or loosen supply, directly influencing global prices.

Sanctions and trade restrictions: U.S. or international sanctions can limit oil exports from certain countries, impacting global availability.

Global Economic Growth: Strong economic performance drives industrial activity and transportation demand, increasing energy consumption and prices.

Interest Rates/Inflation: Higher interest rates can slow economic growth and energy demand, while inflation can drive up operational costs for producers. 

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