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02.01.2023 05:01 PM
2022: the year when oil and gas sector stocks became market favorites

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Oil and gas firms have been the target of criticism from investors, the non-governmental sector, and governments for their purported leadership in climate change for several years.

The barrage has been constant, ranging from shareholder votes calling for more significant promises to decrease greenhouse gas emissions to lawsuits ordering operators in the oil and gas sector to effectively limit their core business.

Because of this, oil and gas company shares as well as the corporations that issued them have lost favor in the stock market and the business sector.

A startlingly large number of nations have realized that while lowering emissions may be a worthy objective, providing electricity without outages is still the top priority this year. This realization has considerably boosted the consumption of fossil fuels in Europe, which has raised the price of oil and gas.

The share prices of oil and gas businesses increased along with the price of fuel. They have developed so impressively that they now top the market this year. The cause: enormous profits in the face of the European energy crisis, which is naturally drawing a lot of negative attention from governments concerned about the environment.

Up to 15 S&P 500 leaders will come from the energy sector, according to a Financial Times estimate published last week, with Occidental Petroleum topping the list after its shares increased by 120 percent this year. Additionally, the energy sector outperformed in a year in which the stock market as a whole underperformed due to aggressive monetary policy tightening in both the US and Europe as well as a strong increase in bond yields that kept investors away from stocks.

The S&P 500 would experience a fall of 21%, according to a recent study from Bloomberg, which would be the greatest since 2008, the year of the global financial crisis. Aside from cryptography firms that have been harmed by the collapse of the digital currency and the FTX cryptocurrency exchange, it appears that huge technology companies have suffered the most this time around. Meta alone has lost 60% this year. Even Tesla has not been immune to the upheaval in the stock market; in the past few weeks alone, the business has seen a loss of up to 70% of its value as a result of mounting worries about the demand for electric vehicles. Many referred to the price decline as a long overdue correction and a reality check, but Elon Musk reassured Tesla staff that the firm will eventually regain its highest level of value.

The FT reports that shares of energy companies have increased by around 60% this year alone in the United States alone, making them look more and more appealing to investors who had previously been wary of oil and gas. It was only a matter of time until investors realized their top objective in investing was making money, given this situation and the rising need for oil and gas, a reality that even the International Energy Agency did not dispute.

Oil and gas corporations are more than willing to keep giving money back to investors in both Europe and the US, but they are especially active in the US shale sector due to record earnings and windfall income taxes that threaten future production costs.

Irina Yanina,
Analytical expert of InstaForex
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