Natural gas has been a reliable source of energy since the mid-19th century and currently makes up around 26% of Australia's annual electricity production1.
Australia is also one of the world's largest liquid natural gas producers (LNG).
Gas has also become a widely-traded commodity due to its abundance and usage.
How to invest in gas
There are 4 main ways to invest in gas in Australia:
There are no longer any gas-specific ETFs on the ASX, but there are several ETFs that track the performance of energy companies, including gas companies.
Pros
ETFs give you widespread access to the natural gas industry at a competitive price.
In comparison to some of the other options ETFs are seen as a safer, more reliable choice for investors.
Cons
There is less control over your investment due to the diverse range of assets in an ETF.
What are the best ASX gas ETFs?
Here are some of the top ASX gas-related ETFs based on performance over the last 5 years2:
BetaShares Global Energy Companies ETF - Currency Hedged (ASX: FUEL) - 23.51%
VanEck Vectors Australian Resources ETF (ASX: MVR) - 21.29%
SPDR S&P/ASX 200 Resource Fund (ASX: OZR) - 12.96%
2. Buy shares in gas companies
Another popular way to invest in the gas industry is by buying shares in publicly-traded gas companies.
While gas companies may benefit from increasing gas prices, their stock price will be influenced by a variety of other factors including the company performance, the wider economic situation and general stock market trends and volatility.
One of the most conventional and accessible ways of entering the market.
Choose from a variety of stock from different companies.
Exit the market at any time.
Cons
Interference from businesses involved in the refining process can curb a company's stock value, so share prices don't always grow at the same rate as the price of the commodity itself.
As with all shares on the stock market, their value can go down as well as up.
What are the best ASX gas stocks?
This is a list of the 5 best-performing gas stocks on the ASX based on performance over the last 12 months:
Empire Energy Group Ltd (ASX: EEG) - 73.08%
Omega Oil and Gas Ltd (ASX: OMA) - 58.82%
Talon Energy Ltd (ASX: TPD) - 44.41%
New Zealand Oil and Gas Ltd (ASX: NZO) - 13.04%
Tlou Energy Ltd (ASX: TOU) - 11.11%
This data is based on gas companies with the best 12-month return and a market capitalisation of more than $30 million (last updated 11 October 2024).3
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3. Trade gas futures
Futures trading is a form of investing that lets you speculate on the future price of a certain asset, such as gas.
When you buy a gas futures contract, you're betting on either the price of gas going up or down over a certain period of time.
In Australia, one of the most common methods for trading gas and other commodity futures is through CFD brokers.
When trading gas CFDs, you don't actually own the underlying asset, but can potentially make money if you can correctly predict where the price of gas goes.
However, it's worth keeping in mind that futures trading (and specifically CFD trading) is an advanced form of investing and only suited to experienced traders.
Some of the most commonly traded gas-related commodities in the futures markets include liquid natural gas, low sulphur gasoline and regular gasoline.
Pros
With a good knowledge of the market and some good fortune gas futures could bring you large returns on your investment.
You can profit from the price movements in gas without having to buy gas directly.
Cons
The market is unpredictable and constantly fluctuating - futures are vulnerable to these movements and making the wrong investment can lose you money.
Futures trading is extremely difficult
If you don’t act on futures within the specified period they expire and are worth nothing.
Compare CFD brokers
Disclaimer: General information only. All forms of investments (and in particular, trading CFDs, commodities and forex) carry significant risk, including the risk of losing more than the invested amounts, market volatility and liquidity risks. Past performance is no guarantee of future results. Such activities are not suitable for most investors.
Trading CFDs and forex on leverage is high-risk and you could lose more than your initial investment. It may not be suitable for every investor. Refer to the provider’s PDS and consider the risks before trading.
4. Invest in MLPs
Another way to invest in gas is by buying stocks in Master Limited Partnerships (MLPs). MLPs are a type of company that generally operate in the natural resources sector.
MLPs are structured to offer certain tax advantages that mean profits are only taxed when they are distributed to the general and limited partners of a company.
This type of set-up is appealing to some investors, as MLP returns are not taxed in the same way as dividend-paying shares.
MLPs also tend to be seen as a lower risk, but longer term, investment option.
There are some risks that come with MLPs however, including demand, market volatility and the fluctuation of prices, as well as new legislation, environmental disasters/hazards and political and social shifts.
Pros
Some of the dividend payments offered can bring strong returns on your investment.
MLPs are easy to access through brokers and advisors.
Cons
As with shares, businesses with an interest in the manufacturing process of gas can influence market value, meaning stock prices may not be in line with commodity prices.
Demand and market risk can have an impact on MLPs, and companies may choose to withdraw their dividends.
Is gas a safe investment?
The world relies on gas for energy, and its abundance makes it a quite a reliable commodity on the stock market.
However, the market is never completely safe, and gas is no exception:
Pipeline incidents: A risk for the environment as well as your profits, a burst pipeline can have disastrous effects on both your investments and the ecosystem at large.
Dividend cuts: Gas companies often distribute dividends to shareholders, which allows their investments to make a regular income. If a company cannot make enough money however, dividends can be cut. This can lead to stock prices plummeting.
Price volatility: Prices for gas have fluctuated violently over the years, usually as a result of shifts in supply. Gas is also seasonal, with people using more during the winter, which can also affect prices.
Frequently asked questions
The price of natural gas fluctuates regularly. It reached its highest price in the middle of 2022 but has dropped since then.
Gas is found in rock formations deep underground. Once an area has been scouted for natural gas, a drill is set up to begin extraction. Often gas is extracted from the same source as crude oil, although using a different process.
The world's largest gas-producing nations include the USA, Russia, Iran and Qatar.
Gas is a popular investment commodity due to its volatility. However, it's volatility also makes it a risky investment, especially for inexperienced traders.
It also offers a way for investors to diversify their portfolios.
Important information: Powered by Finder.com.au. This information is general in nature and is no substitute for professional advice. It does not take into account your personal situation. 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 most investors. You do not own or have any interest in the underlying asset. Capital is at risk, including the risk of losing more than the amount originally put in, market volatility and liquidity risks. Past performance is no guarantee of future results. Tax on profits may apply. Consider the Product Disclosure Statement and Target Market Determination for the product on the provider's website. Consider your own circumstances, including whether you can afford to take the high risk of losing your money and possess the relevant experience and knowledge. We recommend that you obtain independent advice from a suitably licensed financial advisor before making any trades.
Tom Stelzer is a journalist with 6 years of experience covering personal finance, specialising in investment and cryptocurrency. With a Master of Media Arts and Production and a Bachelor of Communications in Journalism from the University of Technology Sydney, Tom provides expert analysis on digital assets and market trends, helping readers navigate the fast-evolving world of finance.
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