Energy prices raise oil and gas stocks, weigh on the economy [Energy]

By DAMIAN J. TROISE  – Business journalist

Energy prices will skyrocket in 2021 and oil and gas stocks are the clear winners, but the losers could turn out to be businesses and consumers.

The energy sector has left the broader market far behind in 2021. The S&P 500 energy stocks are up more than 50% compared to an increase in the overall index of around 20%. Devon Energy, Marathon Oil, and Occidental Petroleum all more than doubled this year.

While energy stocks benefit from high demand and lagging supply, other sectors of the economy have a harder time dealing with them.

Rising oil and gas prices are adding to broader inflationary pressures that weigh on businesses and drive up costs. A large number of manufacturers find it more expensive to start up operations with rising energy costs. Airlines are being hurt by higher kerosene costs as they try to rebuild their profits. Consumers in the US and around the world are facing tighter pressure on their wallets due to rising energy costs.

The fertilizer manufacturer CF Industries temporarily stopped operations at two plants in Great Britain in September due to high natural gas prices. Ed Bastian, CEO of Delta Air Lines, warned investors in early October that fuel prices will affect his ability to remain profitable through the end of the year. She expects a “modest” loss in the fourth quarter.

Consumers are already paying more for goods as businesses experience higher fuel costs, raw material costs and supply chain disruptions. Even more worrying for some analysts is what h -pens when people have to cut their spending to pay for higher gas and heating bills. Economic recovery depends on continued consumer spending, but higher energy costs could lead to less discretionary spending on services, travel and goods.

“At that point, the US consumer was able to withstand the surge in energy prices,” said Megan Horneman, director of portfolio strategy at Verdence C -ital Advisors. “However, there is evidence that consumers are using credit cards to pay for the rising cost of essentials, including energy.”

Gasoline prices will be displayed at a gas station near the Space Needle in Seattle on Thursday, September 2, 2021. Energy prices will skyrocket in 2021 and oil and gas stocks are the clear winners, but the losers could turn out to be businesses and consumers. The energy sector far overtook the broader market in 2021. ( – Photo / Ted S. Warren, File)

The Energy Information Administration estimates that US households will spend 30% more on natural gas and 43% more on heating oil this winter. Americans are already being wedged at the gas pump, where average gasoline prices are up about 56% year over year, according to the AAA.

Europe is facing a natural gas crisis as winter  -proaches without enough supply to meet demand. China is also facing shortages and electricity is already being rationed to industries in certain places, and a slowdown in production there could ultimately lead to even higher prices for raw materials and consumer goods worldwide.

The g – between supply and demand for energy is likely to persist, analysts said. OPEC and other suppliers are still cautious about stimulating oil production and it is likely too late to increase natural gas supplies before winter. This will likely continue to prop up energy stocks as the big winners in the economy.