Energy

energy

Energy isn't actually real—it's just a way for us to keep track of interactions. (Humans deal with stuff that isn't real all the time. Words—words aren't "real," they are just ways that one human can share an idea with other humans.) If we keep track of all the energy changes in different interactions, we find that energy is conserved. This means that if you could measure all the energy before an interaction, you would find that the total energy is the same after the interaction. It's just in different places. What about the units for energy? The most common energy unit in science is the joule. One joule is the amount of energy it would take to push with a force of 1 newton over a distance of 1 meter. That doesn't really help you get a good feeling for this unit though. How about this? If you pick up a textbook off the floor and put it on a table, that's about 10 joules of energy.

Overview of the Energy Sector

  • 1. One is non-renewable energy, which includes oil and petroleum products, gasoline, natural gas, diesel fuel, and nuclear. The other one is renewable energy, such as hydropower, solar power, and wind power.

2. The other one is renewable energy, such as hydropower, solar power, and wind power.

Energy businesses incur lager capital expenditures, and they own large amounts of fixed assets. Such assets include land for oil reserves, plants and equipment for crude oil and raw natural gas processing, and infrastructure or transportation. Energy companies also make substantial spending on research and development (R&D) to update technology in drilling and processing to imporve efficiency and adapt to the changing environmental policies.

distributepower

Components of the Energy Sector The GICS further divides the energy sector into the energy equipment & services industry and the oil, gas & consumable fuels industry. 


 1. Energy Equipment & Services Industry 


The energy equipment & services industry comprises oil and gas drilling contractors, manufacturers of drilling equipment, and businesses that provide services related to drilling and completion of oil or gas wells. Helmerich & Payne, Inc., Unit Corporation, and Exterran Corp. are some of the players in the U.S. energy equipment & services industry. 


 2. Oil, Gas & Consumable Fuels Industry 

Companies in the oil and gas industry can be categorized into the upstream, the midstream, and the downstream. They have different positions in the supply chain.

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  • The upstream companies are involved in exploring potential crude oil and natural gas fields. They also exploit these energy resources through drilling and operating wells. Mergers, acquisitions, and divestitures happen in the upstream frequently.
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  • The midstream provides storage, transportation, and wholesale marketing for oil, gas, and petroleum products. Transportation providers include pipeline transportation companies, barge companies, railroad companies, and other logistics companies. 

  • The downstream is involved in post-production activities. The downstream companies refine crude oil and raw natural gas into consumable fuels, such as gasoline, diesel fuel, and jet fuel. They also distribute derived products such as waxes, lubricants, and many other petrochemicals. The midstream is often considered a part of the downstream.

Investing in the Energy Sector

The energy sector provides several investment options for interested parties. Investors can purchase individual stocks or invest in mutual funds and exchange-traded funds (ETFs). An ETF can provide investors with a diversified portfolio by tracking an underlying index. The SPDR S&P Oil & Gas Explore & Prod ETF (XOP) tracks an equally weighted portfolio of U.S.-based oil and gas exploration and production companies. It is more diversified than a cap-weighted ETF. Investors can also purchase commodities through futures and options contracts. For example, the New York Mercantile Exchange (NYMEX) offers the NYMEX WTI Crude Oil Futures (CL). It is the most liquid crude oil contract in the world. NYMEX also provides the RBOB Gasoline Futures and NY Harbor ULSD Futures in the subgroup of refined products, as well as many other energy products. Any companies sensitive to the price change of energy can hedge their risks by holding such contracts.