Energy stocks went through a long, rough period leading into 2021. Since 2014, the whole sector has been maligned by low prices and sluggish demand. Renewable energy had stolen a lot of attention and funding and the traditional energy sector languished. However, a unique set of economic circumstances means it may be the right time to get back into energy. Oil prices have been rising strongly (a good inflation hedge), which is a nice catalyst, but almost more importantly, higher interest rates—which are clearly on the horizon—are a big headwind for renewables. Renewable energy projects take a great deal of financing and a long time to set up, which means higher rates increase costs and slow down financings.
FINSUM: Energy seems to be getting back in vogue, that said, the rise of ESG standards in debt financing might mean traditional energy projects also suffer.
- energy
- oil
- bull market
- rates
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
