Ahead of the next CPI (consumer price index) release during the week of March 7, American economic experts think inflation will surge higher thanks to increased energy prices. Russia's invasion of Ukraine is one major factor pushing gas and oil prices higher, and billionaire investors are responding by being bullish on oil stocks.
With oil prices on the rise for the foreseeable future, is it a good time to buy into the energy sector? For many, the answer is yes.
Gas surpasses $4 per gallon nationwide, U.S. crude oil temporarily spikes to $130 per barrel.
According to AAA, the national average for a gallon of gas in the U.S. on March 7 is $4.065. This marks the first time the national average for gas prices has exceeded $4.00 per gallon since 2008 during the Great Recession.
Meanwhile, the cost of U.S. crude oil temporarily spiked to $130 per barrel overnight on March 6 (again, the highest level since 2008). However, the surge didn’t last. Rebecca Babin, a senior energy trader at CIBC Private Wealth, told reporters, “Crude is coming off the highs following comments from Germany saying they have no plans to halt Russian energy imports, indications that the US is exploring replacement barrels from Venezuela and Saudi Arabia.”
Warren Buffett is investing heavily in oil stocks amid the price hike.
Berkshire Hathaway, led by billionaire Warren Buffett, invested $5 billion in Occidental Petroleum (OXY). The company also added to its existing investment in Chevron Corporation (CVX).
Not everyone agrees with Buffett’s decision to double down on oil stocks. Some believe prices have peaked and will lose value in the future as the global supply adjusts to isolating Russia and its resources.
High oil prices can signal a recession, especially if they double within a one-year period. This was true during the 2008 recession. Others suggest that high oil prices don't have as much power on the U.S. economy as they did back then because oil makes up a smaller portion of the nation’s GDP.
Swing-term oil investments may produce profit — but what companies should investors target?
Swing-term investments (otherwise known as investments over a weeks-long period or months-long period) in oil stocks may produce returns for investors. However, it’s important that traders make sure energy is part of a diversified portfolio equipped with commodities and other types of securities (like stocks and funds).
Energy companies like Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), TotalEnergies SE (TTE), PetroChina Co. Ltd. (PTR), ConocoPhillips (COP), BP PLC (BP), and EOG Resources Inc. (EOG) are consistently at the top of the sector.
COP stock is up about 39 percent YTD as of March 7. XOM stock is up more than 35 percent during the same period.
Not all energy stocks are created equal. Russian energy companies like Lukoil (OTC:LUKOY) have lost the majority of their value in a mass exodus of Russian stocks and securities. It would behoove investors to avoid Russian energy stocks as international forces isolate the Russian economy.