The energy sector is the classification of stocks of all companies involved in the production and supply of energy such as exploration and extraction of coal, oil and gas, drilling, development, and distribution of oil and gas, and integrated power firms.
The global demand and supply for universal energy, to a large extent, drives the performance of the energy sector. When the prices of oil and gas are high, the stocks of the energy sector perform very well in the stock market, and vice versa. It should be pointed out that the political events effect the energy sector and have driven the price of oil, according to history.
Companies under the energy sector include:
1. the petroleum companies such as oil companies, petroleum refiners, and businesses involved in marketing and sales
2. the gas companies such companies involved in extraction of natural gas and coal gas, and marketing, distribution, and sales of gas
3. the coal industry
4. the electrical power companies such companies generating electricity and distributing electric power
5. the companies that specialize in nuclear power
6. the companies involved in renewable energy such as alternative energy, alternative fuels, solar power generation
The major players in the energy sector are the oil and gas companies and integrated oil and gas companies that deal in exploring, producing, refining, and distributing oil and gas. Due to the fact that oil and gas operations are capital-intensive, most oil and gas companies are integrated.
The operations of the oil and gas companies can be classified into upstream, midstream, and downstream activities. The upstream activities include the exploration and production of oil and gas. The midstream activities involve the transportation and storage the oil and gas. The downstream activities include refining and marketing oil and gas.
The performance of the energy sector in the stock market can be used to evaluate the performance of an economy and the development of the society. Since the use of energy is necessary for comfortable human living, the development of energy resources is crucial for any developed country.