Energy prices lift oil and gas stocks, weigh on the economy

Oct 28, 2021, 6:00 AM | Updated: 8:10 am
FILE - Gas prices are shown at a station, Thursday, Sept. 2, 2021, near the Space Needle in Seattle...

FILE - Gas prices are shown at a station, Thursday, Sept. 2, 2021, near the Space Needle in Seattle. Energy prices are soaring in 2021 and oil and gas stocks are the clear winners, but the losers might just turn out to be businesses and consumers. The energy sector has far outpaced the broader market in 2021. (AP Photo/Ted S. Warren, File)

(AP Photo/Ted S. Warren, File)

Energy prices are soaring in 2021 and oil and gas stocks are the clear winners, but the losers might just turn out to be businesses and consumers.

The energy sector has far outpaced the broader market in 2021. The S&P 500’s energy stocks are up more than 50%, compared with a roughly 20% gain for the overall index. Devon Energy, Marathon Oil and Occidental Petroleum have all more than doubled in value this year.

While energy stocks are reaping the benefits from high demand and lagging supplies, other areas of the economy are having a tougher time coping.

Surging oil and gas prices are adding to broader inflation pressures that are squeezing businesses and driving up costs. A wide range of manufacturers are finding it more costly to ramp up operations as energy costs rise. Airlines are getting hurt by higher jet fuel costs as they try to rebuild profits. Consumers in the U.S. and around the world are facing a tighter squeeze on their wallets from rising energy costs.

Fertilizer maker CF Industries briefly halted operations at two facilities in the U.K. in September because of high natural gas prices. Delta Air Lines CEO Ed Bastian warned investors earlier in October that fuel prices will hurt its ability to remain profitable through the end of the year. It expects a “modest” loss in the fourth quarter.

Consumers are already paying more for goods as companies pass through higher fuel costs, raw materials costs and supply chain disruptions. More worrisome to some analysts is what happens if people have to cut back on spending in order to pay for higher gas and home heating costs. The economic recovery depends on continued consumer spending, but higher energy costs could mean less discretionary spending on services, travel and goods.

“At this point, the U.S. consumer has been able to withstand the rise in energy prices,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “However, there is evidence that consumers are turning to credit cards to pay for the rising costs of necessities, including energy.”

The Energy Information Administration expects U.S. households to see a 30% increase in spending on natural gas this winter and 43% more on heating oil. Americans are already getting pinched at the pump, where average gasoline prices are up roughly 56% from a year ago, according to AAA.

Europe is facing a natural gas crisis as winter approaches without enough supply to meet demand. China is also facing shortages and power is already being rationed to industries in certain places and a slowdown in manufacturing there could eventually mean even higher prices for commodities and consumer goods globally.

The disconnect between supply and demand for energy will likely linger, analysts have said. OPEC and other suppliers are still cautious about ramping up oil production and it’s likely too late to boost supplies of natural gas ahead of winter. That will likely continue propping up energy stocks as the economy’s big winners.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


              FILE - In this Sunday, Oct. 24 2021, photograph, pump prices are posted on a sign at a Conoco station in southeast Denver. Energy prices are soaring in 2021 and oil and gas stocks are the clear winners, but the losers might just turn out to be businesses and consumers. The energy sector has far outpaced the broader market in 2021. (AP Photo/David Zalubowski, File)
            
              FILE - Gas prices are shown at a station, Thursday, Sept. 2, 2021, near the Space Needle in Seattle. Energy prices are soaring in 2021 and oil and gas stocks are the clear winners, but the losers might just turn out to be businesses and consumers. The energy sector has far outpaced the broader market in 2021. (AP Photo/Ted S. Warren, File)

AP

FILE - Local authorities inaugurate the Christmas lighting in the streets of Vigo, Spain, Nov. 19, ...
Associated Press

Sober or bright? Europe faces holidays during energy crunch

VERONA, Italy (AP) — Early season merrymakers sipping mulled wine and shopping for holiday decorations packed the Verona Christmas market for its inaugural weekend. But beyond the wooden market stalls, the Italian city still has not decked out its granite-clad pedestrian streets with twinkling holiday lights as officials debate how bright to make the season […]
1 hour ago
Associated Press

Today in History: November 26, the NHL is founded

Today in History Today is Saturday, Nov. 26, the 330th day of 2022. There are 35 days left in the year. Today’s Highlight in History: On Nov. 26, 1950, China entered the Korean War, launching a counteroffensive against soldiers from the United Nations, the U.S. and South Korea. On this date: In 1825, the first […]
1 day ago
FILE - A hippo floats in the lagoon at Hacienda Napoles Park, once the private estate of drug kingp...
Associated Press

Wildlife conference boosts protection for sharks, turtles

PANAMA CITY (AP) — An international wildlife conference moved to enact some of the most significant protection for shark species targeted in the fin trade and scores of turtles, lizards and frogs whose numbers are being decimated by the pet trade. The Convention on International Trade in Endangered Species of Wild Fauna and Flora, known […]
1 day ago
Associated Press

‘Miracle’: Missing cruise ship passenger found OK in water

NEW ORLEANS (AP) — The U.S. Coast Guard says a passenger who went overboard from a cruise ship in the Gulf of Mexico was rescued on Thanksgiving after likely being in the water for hours. The 28-year-old man was reported missing at noon Thursday while the vessel, the Carnival Valor, was heading to Cozumel, Mexico. […]
1 day ago
FILE - Kari Lake, Arizona Republican candidate for governor, speaks to supporters at the Republican...
Associated Press

Lake seeks election records in suit against Arizona county

Kari Lake, the defeated Republican candidate for Arizona governor, has filed a public records lawsuit demanding Maricopa County hand over a variety of documents related to the election.
1 day ago
Dallas Cowboys tight end Peyton Hendershot (89) celebrates with Dalton Schultz (86), Sean McKeon (8...
Associated Press

Giants-Cowboys sets NFL regular-season record for viewers

LOS ANGELES (AP) — The Thanksgiving afternoon game between the New York Giants and Dallas Cowboys set the mark for the most-watched NFL regular-season game on record. The Cowboys 28-20 victory on Fox averaged 42 million viewers, according to Nielsen, surpassing the 41.55 million average for the Dec. 3, 1990, Monday night game between the […]
1 day ago

Sponsored Articles

...
Quantum Fiber

How high-speed fiber internet can improve everyday life

Quantum Fiber supplies unlimited data with speeds up to 940 mbps, enough to share 4K videos with coworkers 20 times faster than a cable.
...
Day & Night Air Conditioning, Heating and Plumbing

Here are 4 signs the HVAC unit needs to be replaced

Pool renovations and kitchen upgrades may seem enticing, but at the forefront of these investments arguably should be what residents use the most. In a state where summertime is sweltering, access to a functioning HVAC unit can be critical.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
Energy prices lift oil and gas stocks, weigh on the economy