Investing in energy stocks

Weigh the benefits and risks of investing in oil, gas, coal and natural gas.

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Sector-specific investing can help you broaden and diversify your portfolio. But each sector comes with a unique assortment of benefits and risks. Energy stocks, in particular, offer a world of opportunities in exchange for occasional volatility. Read on to learn more about investing in energy stocks from Australia.

What are energy stocks?

Energy stocks fit into the energy sector of the stock market — one of 11 sectors defined by the Global Industry Classification Standard (GICS). Companies in the energy sector focus on the location, mining and production of oil, coal and natural gas.

What subcategories are included in this sector?

Companies that fall within the energy sector can be sorted into the following subcategories:

  • Oil and gas. At the start of the supply chain, we find companies responsible for drilling and producing oil and natural gas.
  • Pipelines. These mid-stream providers transport oil and natural gas from the drilling site to their respective refineries.
  • Mining. Mining companies produce coal that helps fuel power plants.
  • Renewable energy. Those that produce wind and solar energy are considered renewable energy providers.
  • Chemicals. This subcategory is comprised of companies responsible for refining oil and gas into specialty chemicals.

How to invest in energy stocks

There are two ways Australian investors can invest in the energy sector: individual stocks or exchange-traded funds. Individual stocks are highly liquid but offer limited exposure. Sector-tracking ETFs are less risky than stocks and offer portfolio diversification but typically pay lower dividends and have higher fees.

You’ll need a brokerage account to invest in stocks and ETFs in Australia. Here’s a quick look at the process:

  1. Select a platform. Explore your brokerage account options to find the platform that best matches your investment goals.
  2. Open an account. Most brokerage accounts can be opened online. You’ll need to fund your account before you can make trades.
  3. Pick your securities. Use your platform’s research tools to search for stocks and ETFs by sector.
  4. Place an order. Once you’ve found a security you’d like to purchase, place your order.
  5. Track your investments. Monitor your investments by logging into your brokerage account.

What energy stocks are there?

What ETFs track the energy sector?

Popular ETFs in the energy sector include:

  • VanEck Vectors Australian Resources (MVR)
  • BetaShares Crude Oil Index ETF (OOO)
  • Vanguard Global Infrastructure Index (VBLD)
  • VanEck Vectors FTSE Global Infrastructure (IFRA)
  • BetaShares Global Energy Companie (FUEL)

Compare solar energy stocks

How is the energy sector performing?

The stock market is in constant flux, and individual stocks can change prices second by second. But you can use the performance of ETFs to gauge the average performance of a stock market sector over time. The graph below tracks the VanEck Vectors Australian Resources (MVR).

Why invest in energy stocks?

Energy is a resource the world depends on. The energy market is massive, and for good reason — this resource has been in high demand for many years. And even accounting for the shift towards clean energy, the world is still decades away from being free from oil, coal and gas.

Profitability in the energy sector is largely tied to the price of crude oil, but stock prices are typically stable and frequently pay dividends. Income from energy stocks may also be tax-sheltered — an attractive incentive for Australian investors.

What unique risks does the energy sector face?

Politics play a sizable role in the energy sector. If companies explore energy resources in unstable territories, projects are at risk of being sidelined or halted in the face of political turmoil.

Incorrect geological reports, oil spills and accidents can be costly for Australian investors. This sector isn’t without its risks and investors should weigh the benefits against the drawbacks before allocating funds.

Compare stock trading platforms

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
$5
No
ASX shares, US shares
Yes
Earn up to 15,000 Qantas frequent flyer points when you transfer an exisiting balance or trade. Offer valid for all new and existing Superhero members until 28 February.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
$8
No
ASX shares
No
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, ETFs
Yes
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CommSec Share Trading Account
$10
$0 for ASX shares, US$25 for global
ASX shares, Global shares, Options trading, ETFs
Yes
Trade with Australia's largest online stockbroking firm.
Enjoy fast, simple and affordable trades, with market leading research and broker recommendations all in one platform
CMC Markets Invest
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

The energy sector offers the opportunity for profit but carries a unique set of risks. The best way to invest depends on your portfolio and your investment goals. Review your trading platform options to find the brokerage account that best meets your needs.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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