Energy Investing: Market Insights & ASX Stocks

We all know that everything needs power. Your electric car, the factory that built it, the data centre running your apps – they all need energy from somewhere.

As the world’s population increases, the demand for energy increases as well. Right now, oil, gas and coal still provide about 80% of it globally. Renewables are growing fast, but they’re building from a small base and there is scepticism from many regarding cost. Until battery storage catches up and doesn’t need government intervention, fossil fuels will remain the backbone.

Governments are pouring billions into renewables while the world still burns around 100 million barrels of oil a day. Wind and solar projects take years to build, and when the wind drops or the sun sets, gas plants step in to keep the grid stable.

Replacing dependable baseload power with stored firm energy requires a major grid overhaul. The overlap between old and new energy won’t disappear soon, both sides still need capital, and smart money plays the transition rather than choosing sides.

Oil trades by the barrel in US dollars, gas by the gigajoule or MMBtu depending on where you are, and coal by the ton. Prices swing with supply, demand, and whatever’s happening in the Middle East that week. OPEC (Organisation of the Petroleum Exporting Countries) can move markets with a press release, while a refinery fire, pipeline rupture, or winter cold snap can send prices soaring overnight. Gas and coal tend to be even jumpier, driven by regional storage levels, transport costs, and short-term weather forecasts.

Renewables are priced in a completely different way. There’s no daily market for sunlight or wind, it’s about long-term contracts, project costs, and the structure of power purchase agreements. Once the panels and turbines are up, returns are steady and predictable, but the upfront capital is big and often backed by governments.

Energy moves in cycles, but like all commodities when supply gets tight, prices run. When everyone’s producing, it becomes a race to the bottom on who can produce the cheapest and prices crash.

When wars break out, embargos or currency issues, energy producing countries can restrict exports, holding others at ransom for higher prices. OPEC will often adjust its production quotas, meaning countries that are OPEC members can control markets.

For renewables it’s a different story, watch battery costs, grid infrastructure spending, and which way government subsidies are heading. If the government is willing to support and set floor prices for energy producers to sell, it’s often a sign of an inefficient market.

Check what they actually produce and how much it costs them to produce it. If a company can produce energy with a decent profit margin without government intervention then it’s a safer investment.

ASX Oil and gas companies live or die on production costs and debt loads, fluctuating prices mean they are at the mercy of larger market forces. For renewable players, look at their project pipeline, whether they’ve got grid connections sorted, and who’s buying their power. Management matters everywhere, but especially in energy. The cowboys who leveraged up during the good times rarely survive the bad ones.