Today (10/18/21), the price of crude oil went over $86 a barrel, the highest level since October 2018. Natural gas and coal are also at record levels going into the fall/winter heating season. If you were lucky enough to anticipate this and bought shares of oil companies back in August, you would be in-the-money now. I’m afraid that the demand for energy will get worse and prices will go even higher. This usually has a negative impact on the economy as everyone spends more at the gas pump and to heat their homes. The cost of anything that needs to be shipped goes up as companies try to offset fuel costs. This situation tends to stay around long after energy prices start to decline.
I think it’s too late to buy oil company stock. It may be better to start selling shares of any company that doesn’t have the ability to pass on higher energy costs to their customers and look for investments that are not affected by the cost of energy. The sectors that I would be looking at are Financial, Medical, and Software. Sectors to avoid would be Transportation, Industrial, and any companies that sell consumer products. The problem we are having with delays in unloading container ships is not going away. I’ve been reading reports about it in the news for months. This situation is going to have a serious impact on retail sales during the Christmas buying season. Merchandise will be in short supply and prices will be unusually high.
At home, I’m already trying to prepare myself for the higher gas and electric bills that will be coming. I plan on setting the thermostat no higher than 68 degrees F and using the gas fireplace much less than last year. The gas company has added a 19 cent surcharge for every unit of energy I use to pay for the price spike from last February. Last month I used 17 therms of gas. During the winter months, my usage goes over 100 therms. This will add an extra $20 to each bill, on top of the 50%+ increase in the cost of natural gas. The money to pay the heating bill will have to come from money that I would have spent on food, travel, and entertainment.