Oil stocks as a group have been market laggards since the S&P 500 bottomed out late last year. If there's any solace to be found, it's that analysts say rising demand and lower inventories should help the top-rated oil stocks outperform in the second half of 2024 and beyond. 

Oil stocks are underperforming for a bunch of reasons, but an underappreciated factor might be that the majority of the bull market's gains have been driven by the Magnificent 7 stocks and excitement over all things AI. 

But slower economic growth, a softening jobs market and the cumulative effect of years of above-average inflation have also been a weight on the sector. Happily, concerns about the state of consumer spending appear to have been overblown.

"Many U.S. consumers have indeed faced weakening finances in 2024, but their demand for crude oil products has proved resilient," write Wells Fargo Investment Institute analysts Mason Mendez and John Laforge. "After a soft start to the 2024 driving season, U.S. crude oil demand has improved and is now in-line with its typically strong seasonal pattern."

Indeed, the U.S. four-week consumption average hit its highest point of the year in late June, the analysts add. At the same time, U.S. airport travel activity notched a record high of 2.82 million passengers per day in the final week of June.

The improving backdrop for demand has helped the S&P 500's energy sector close some of its performance gap with the broader market midway through the year, but it still has catching up to do. For the year to date through mid-July, the S&P 500 was up 17% on a price basis. The energy sector of the S&P 500 trailed the broader S&P 500 by about 5 percentage points.

How to find the best oil stocks

In order to find the best oil stocks to buy now, we started by screening the S&P 500's oil & gas sector for Wall Street analysts' top-rated names. 

Here's how the ratings process works: S&P Global Market Intelligence surveys analysts' stock ratings and scores them on a five-point scale, where 1.0 equals Strong Buy and 5.0 means Strong Sell. Any score of 2.5 or lower means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call. In other words, lower scores are better than higher scores.

We further limited ourselves to stocks with more than 10 Strong Buy recommendations (in order to ensure adequate analyst coverage and sample size). Lastly, we dug into research, fundamental factors, valuation, analysts' estimates and other data on the top names.

Our screen served up both familiar names and smaller players. Have a look at the table below to see Wall Street's best oil stocks to buy now.

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The national average price of regular unleaded is off its peak from earlier this spring of about $4.50 per gallon. Today, the national average stands at $4.22. Drivers are not complaining about the decrease. But the national average remains more than $1 per gallon higher than at this time a year ago. In general, prices starting with a 4 tend to feel high for American consumers, and often lead them to cut back their spending on other goods or services, since it’s difficult to drive less on short notice. We expect gas prices to keep easing, and perhaps slip a bit below the $4 threshold this summer, but probably not by much. And if oil prices start climbing again due to continuing disruptions to exports in the Middle East, gas could quickly shoot up again. Diesel, now averaging $5.38 per gallon, is also coming down, but like gas, remains well above last year’s prices.

Benchmark West Texas Intermediate crude oil is trading near $90 per barrel, after spiking above $100 earlier this spring due to the war with Iran and the related blockage of shipping in and out of the Persian Gulf. Much of the region’s enormous oil output is bottled up in the Gulf as Iran tries to control shipping through the narrow Strait of Hormuz, and the U.S. Navy in turn blockades Iran’s ports. Any new hope for a peace deal to resolve the situation would cause oil prices to drop. But so far, claims that a deal was near have fallen apart, keeping oil traders on edge. We look for WTI to trade near $90 per barrel if the current stalemate continues. Later in the summer, oil could rally again if reserves of stored oil around the world run too low and raise fears of shortages before the Persian Gulf reopens to normal shipping.

Natural gas prices have been ticking up as summer heat intensifies in the U.S. Benchmark gas futures contracts recently traded near $3.30 per million British thermal units, about 10% above their earlier trading range. Warming weather across much of the country means more demand for electricity to keep air conditioners running. And gas is the top fuel for generating power in the United States. We look for gas futures prices to trade in a volatile pattern, dropping to $3 per MMBtu if weather forecasts show lower temperatures returning, or approaching $4 per MMBtu if a major heat wave looms.

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On Tuesday, President Biden posted a tweet celebrating a two-week drop in the national average of the price of a gallon of gas.

Ahead of the midterm elections, prices at the pump continue to dominate headlines and stump speeches. Whether that will translate into a meaningful, sustained drop in the pain many Americans feel each time they fill up remains to be seen (and Kiplinger's forecasts energy prices will stay elevated through the fall).

Much like swings in the stock market, politicians take equal measures of credit and blame for swings in the cost of gasoline. But the reality is that gas prices don't hinge on elections. Energy markets are hugely complex with the cost of a gallon moving on everything from refining capacity to crude prices to geopolitics. 

Everything from refinery outages to OPEC export reductions has recently pushed fuel prices higher. And consumers continue to fret over those additional costs alongside broader worries about persistent inflation in everything from food to auto insurance.

The one area where politicians do have an increased measure of control - gasoline taxes - has resulted in taxes being cut or subsidies sent out to give motorists some relief this year. However, even with government intervention, the overall impact on the price of gas has been negligible. 

For consumers feeling the pinch, there are ways to save on gas. Dropping overall vehicle weight, removing roof racks and driving at a more reasonable speed all help, at least a bit. Whether voting in November will make a similar difference is still an open question.

For expert updates on energy prices and the economy, subscribe to The Kiplinger Letter. Click here for a free issue and more information.

Stocks initially sold off Thursday after the latest consumer price index (CPI) showed inflation remained stubbornly high in September, before embarking on a massive rebound to end the day with impressive gains. 

The Labor Department this morning said consumer prices ran hotter-than-expected last month – with many experts saying this all but guarantees the Federal Reserve issues another substantial rate hike at its November meeting. The Dow and S&P 500 were off roughly 2% at their session lows, while the Nasdaq was down 3%. 

But by lunchtime, all three indexes were in positive territory – and they continued climbing from there. "Today's market reversal was a head-scratcher," says Edward Moya, senior market strategist at currency data provider OANDA. "Despite a hot inflation report, U.S. equities turned positive, as some investors are convinced core inflation will soon start trending lower." Moya adds that the rally "probably got a boost from short covering as well, but given the path for rates is higher, this market reversal won't last long." 

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Today, though, the buying lasted into the close. The Dow Jones Industrial Average surged 2.8% to 30,038, while the S&P 500 Index (+2.6% at 3,669) and the Nasdaq Composite (+2.2% at 10,649) easily snapped their lengthy losing streaks.

The Best Energy ETFs to Buy

Investors should continue to expect high levels of inflation, at least in the near term. According to Kiplinger staff economist David Payne, inflation will likely end 2022 around 8% before easing back in 2023. 

José Torres, senior economist at Interactive Brokers, says that one contributing factor to higher inflation will be rising energy prices, which jumped recently following a decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to cut oil output by 2 million barrels per day. "If lower gasoline prices haven't produced satisfying inflation readings in August and September, how damaging might they be in October?" Torres asks. "A challenging winter ahead for Europe and the possibility of the relaxation of Chinese lockdowns may drive additional energy demands and propel prices further." 

If that's the case, oil stocks and energy exchange-traded funds (ETFs) might get a lift as well. Here, we explore nine energy ETFs that could help investors leverage gains in oil and gas prices. 

Stocks opened sharply lower Wednesday following two straight days of red-hot gains as yields on government bonds resumed their recent climb.

The 10-year Treasury yield jumped 13.6 basis points to 3.753% after today's round of data pointed to a resilient U.S. economy. (A basis point is equivalent to 0.01%.)

The economic reports released this morning included the ADP employment report that showed the U.S. added a higher-than-expected 208,000 private-sector jobs in September. Additionally, the Institute for Supply Management's (ISM) services purchasing managers' index slipped to 56.7% in September from the August reading of 56.9%. So while activity in areas such as restaurants and hotels slowed last month, it still remained exceptionally strong. 

The equity market's big moves higher on Monday and Tuesday "came on the back of multiple economic data points, all helping markets point towards a sooner-rather-than-later Fed pivot," says Stefanos Bazinas, execution strategist at the New York Stock Exchange. "Today's round of economic data, however, has reversed some of this Fed pivot optimism." 

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Still, despite that early selloff that saw major market indexes down between 1%-2%, all three finished well off their session lows. At the close, the Dow Jones Industrial Average was down 0.1% at 30,273, while the S&P 500 Index (-0.2% at 3,783) and the Nasdaq Composite (-0.3% at 11,148) ended with modest losses.

Other news in the stock market today:

• The small-cap Russell 2000 fell 0.7% to 1,762.
• Gold futures slipped 0.6% to settle at $1,720.80 an ounce.
• Bitcoin edged down 0.5% to $20,127.02. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Helen of Troy (HELE) jumped 3.3% after the consumer products maker, whose brands include Braun and Vicks, reported earnings. In its fiscal second quarter, HELE reported earnings of $2.27 per share on revenue of $521.4 million, beating analysts' consensus estimates.

The Pros' Favorite Oil Stocks

Energy stocks got a big boost today after OPEC+ issued its biggest supply cut since the early days of the pandemic. Specifically, the Organization of the Petroleum Exporting Countries and its allies said they will decrease production by 2 million barrels per day in an effort to buoy oil prices, which have been spiraling in recent months amid fears of slowing demand. 

In reaction to the news, U.S. crude futures spiked 1.4% to $87.76 per barrel and the energy sector handily outperformed, jumping 2.1%. Today's move by OPEC marks a win for oil bulls – including Warren Buffett, whose Berkshire Hathaway (BRK.B) holding company has been steadily increasing its shares of Occidental Petroleum (OXY) in recent quarters – sparking rumors of potential buyout. 

While Buffett is upbeat on Occidental, analysts are not, giving the stock a consensus Hold recommendation. But while OXY may not be one of the best oil stocks to buy now, according to Wall Street pros, these three names certainly are. Check them out.

A slow macroeconomic news day resulted in one of the lowest-volume sessions of 2022, though a few individual equities endured more than their fair share of volatility.

The S&P 500, which finished with a small gain Wednesday, posted the index's smallest intraday range for the year, according to Michael Reinking, senior market strategist for the New York Stock Exchange. "That bit of stability is welcome after the violent reversal seen during yesterday's session, which saw the early 1% gain in the S&P 500 turn into a 2% loss when all was said and done."

Not so for the energy sector (-3.5%), where recent whipsawing continued. U.S. crude oil futures declined 1.8% to $109.78 per barrel as traders waited for news from the Organization of the Petroleum Exporting Countries and their allies (together, OPEC+), which are meeting today and tomorrow. That clipped oil and gas stocks including Devon Energy (DVN, -6.1%) and APA (APA, -6.9%).

A few individual stocks hit the mat even harder. Bed Bath & Beyond (BBBY) fell 23.6% after announcing that quarterly revenues had plunged by 25% to a worse-than-expected $1.46 billion, and that same-store sales (revenues earned in stores open at least 12 months) were off by 24%. And worse –the ship just lost its captain, as BBBY said CEO Mark Tritton has left the company.

Another firm in troubled waters is Carnival (CCL, -14.1%), which dragged down the entire cruise line industry Wednesday after a price-target cut from Morgan Stanley. Analyst Jamie Rollo now sees the stock going to $7 per share (-32% from yesterday's closing price), with a worst-case scenario in which a global downturn sends the stock to zero.

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"If there is a demand shock that causes trip cancellations or weak bookings … liquidity could quickly shrink," he says.

Industrymates Royal Caribbean (RCL, -10.3%) and Norwegian Cruise Line Holdings (NCLH, -9.3%) swooned in sympathy.

The major indexes didn't move much, however. The Dow Jones Industrial Average improved by 0.3% to 31,029, while the S&P 500 and Nasdaq Composite slipped marginally to 3,818 and 11,177, respectively.

Other news in the stock market today:

• The small-cap Russell 2000 wasn't nearly so calm, dipping 1.1% to 1,719.
• Gold futures gave back 0.2% to end at $1,817.50 an ounce.
• Bitcoin finished marginally higher to $20,255.00. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Teradyne (TER) slumped 5.2% after BofA Global Research analyst Vivek Arya downgraded the semiconductor equipment manufacturer to Neutral (Hold) from Buy. "We continue to think of Teradyne as a high-quality vendor and leader in the relatively duopoly market of semiconductor testing," Arya says. "However, TER's high exposure to Apple (~10% currently but has been 20-25% in the past) exposes the company to large volatility in iPhone demand and Apple design complexity." He adds that TER's high-growth industrial automation segment is exposed to any downturn in the global industrial economy and competition from Asia.
• It was a volatile session for Nio (NIO), which was down nearly 8% at one point after short seller Grizzly Research issued a report accusing the electric-vehicle maker of an "audacious scheme" to "exaggerate revenue and profitability." Nio replied in a statement, saying the report was "without merit," bringing the shares close to breakeven in late-morning trading, although they still ended the day down 2.2%. CFRA Research analyst Lim Jian Xiong maintained a Buy rating on NIO, saying more disclosures from the company should be expected. "We think NIO's EV portfolio expansion (3 SUV and 2 sedan models in 2022) will sustain its strong revenue momentum, drive an improvement in operating leverage, and support our projected turnaround in NIO's business by Q4 2023," the analyst added.

Trying to Call a Bottom Misses the Point

How low will the market go, and when will it hit its nadir? While there's no crystal ball that has the exact answer to either of these questions, Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott, is happy to project a possible bottom, but he stresses that's not the point.

"We still believe the U.S. equity markets are entering the bottoming process of a correction cycle that began well over a year ago," says Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott. "There is still likely more volatility to come, and within such a framework, we continue to believe the 3,100-3,200 range is a distinct possibility for the S&P 500 in the weeks ahead (before a final low is confirmed)."

However, he says the goal here shouldn't be to trade these markets on a short-term basis or try to pinpoint an exact bottom. "Rather, it should be to take advantage of significant multiple compression in valuations relative to the long-term growth prospects for the U.S. When viewed from this lens, we believe those investors with longer-term horizons can start to put some money to work in the current environment." As in, now.

Thus, keep an eye on values. Kiplinger columnist James A. Glassman recently disclosed his own wish list of stocks to buy while they're down. But the general thrust for investors right now is, if it's high-quality and bargain-priced, now might be the time to bite – as long as you're patient. Keep that in mind as you explore these 15 value stocks that seem ripe for a renaissance.

May's final session was a fitting one for a wild month, with the major indexes swinging up and down Tuesday before closing in the red.

Over the Memorial Day weekend, Federal Reserve Governor Christopher Waller said during a speech in Germany that he expects 50-basis-point interest-rate increases to continue into the later part of the year – a departure from previous dovish statements from Fed members suggesting hikes of that magnitude would be limited to the next two summer meetings.

That sent bond yields spiking Tuesday, with the 10-year Treasury yield reaching as high as 2.88%.

"It is really too bad that the Fed can't learn to speak with one voice on this," says Dean Smith, portfolio manager and chief strategist of investment technology platform FolioBeyond. "The constant seesaw from hawkish to dovish is increasing uncertainty in the market and in the economy. The 'buy-the-dip' mentality that has been nurtured in a generation of investors is being supported and encouraged by these carelessly dovish Fed speakers. In the end, all it does is make their job harder."

Also Tuesday, the Federal Reserve's preferred gauge of inflation – the core personal consumption expenditures (PCE) price index – rose by 4.9% year-over-year and 0.34% month-over-month, which was more than expected.

"The April increase represents the third month of more muted, but still solid, increases," UBS analysts note.

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The consumer discretionary (+0.5%) and communication services (-0.1%) sectors were the best performers in a largely down day. That was largely thanks to Amazon.com (AMZN, +4.4%), whose shareholders on Friday approved a 20-for-1 AMZN stock split set to take effect June 6; that lifted spirits at Alphabet (GOOGL, +1.3%), which intends on executing its own 20-for-1 GOOGL/GOOG stock split in July. (Indeed, 2022 is shaping up to be quite a busy year for stock splits.)

That helped the Nasdaq Composite deliver the smallest loss among the major indexes Tuesday: a 0.4% decline to 12,081. However, the tech-heavy index posted a 2.1% decline for the entire month. The S&P 500 (-0.6% to 4,132) finished May marginally higher, however, as did the Dow Jones Industrial Average (-0.7% to 32,990).

Other news in the stock market today:

• The small-cap Russell 2000 slid 1.3% to 1,864.
• Gold futures declined 0.5% to $1,848.40 ounce, clinching the yellow metal's second consecutive monthly decline.
• U.S. crude oil futures were down 0.4% to $114.67 per barrel, good for a nearly 10% gain in the commodity across May. Oil had a back-and-forth session; gains from the European Union's agreement to ban most Russian crude oil imports were negated after a report that OPEC+ was considering suspending Russia from its oil-output deal.
• Bitcoin rebounded hard during the long weekend, improving by roughly 10% to $31,649 from its Friday afternoon prices. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

As Red Flags Mount, Stock Up on Quality

A few cracks are starting to show in the American economic engine. Wealth management firm Glenmede's Jason Pride and Michael Reynolds say that several U.S. leading indicators are signaling slowing growth.

"Last week, the Flash Composite PMI, which tracks the manufacturing and services sectors, fell," they say. "The latest round of retail earnings reflects slowing demand as consumers grapple with higher costs and pivot their spending from goods to services. The housing market is starting to show signs of softening as sales of newly built homes fell 16.6% in April from March (rising mortgage rates are reducing buyer demand)."

This has Glenmede's recession model projecting a 10% probability of recession within the next 12 months, up from 0% projections to start the year.

That's the kind of environment that, unlike the year-plus of rip-roaring gains out of the COVID bottom, necessitates selectivity – every stock pick isn't just going to stick to the wall, so to speak. Defensively minded investors, for instance, will want to focus on stocks that seem best positioned to perform in bear markets. Dip-buyers will need to make a distinction between "cheap" and "undervalued" – the latter you're likely to find in these high-growth-potential stocks boasting low prices.

And on the whole, it pays to invest in the best of the best. These 10 S&P 500 stocks, for instance, represent the best the index has to offer right now, in the eyes of Wall Street's analyst community. Each of them is teeming with bullish pros who believe they have anywhere between 20% to 110% upside over the next year.

Drivers are watching gasoline prices shoot up these days as the war in the Middle East causes severe disruptions to the region's energy exports. In late February, right before the joint U.S.-Israeli airstrikes on Iran commenced, AAA reported that the national average price of regular unleaded stood at $2.98 per gallon.

Less than a month later, the national average was on the cusp of $4. If the fighting continues and prevents oil and refined fuels from being exported from the Persian Gulf, the price at the pump is likely to spiral still higher.

Drivers suffering from price whiplash might be asking, "Who controls gas prices?" The short answer is that no single person, company or government can really be said to set gas prices, the same way that no single entity controls the prices of the most common types of car insurance.

But it is possible to break down some of the major factors that go into determining what a gallon of gas sells for. Let's take a look.

1. Crude oil

The Department of Energy has a handy chart that breaks down the major expenses involved in turning crude oil in the ground into the refined gas you can put in your car. The biggest, accounting for a bit more than half the price you pay, is the price of crude oil — the raw material from which gas is refined.

The price of that raw material has been soaring lately. On the eve of the war, benchmark West Texas Intermediate crude oil was trading near $65 per barrel. The decline in exports from the oil-rich Persian Gulf region has recently pushed WTI close to $100 per barrel at times. It has also fallen sharply on days when headlines feature hopeful reports about a potential ceasefire, but even when traders think an end to the war might be in sight, WTI has only fallen to around $90.

In other words, oil remains substantially more expensive than before the war began. And it could stay that way even after any ceasefire deal emerges, because it will likely take months for oil exports from the Persian Gulf to start flowing at normal levels again. Damage to oil wells and other infrastructure will take time to repair, keeping markets undersupplied.

Related: Kiplinger Energy Outlook

2. Taxes

The next biggest factor determining gas prices, according to the Department of Energy, is gas taxes — specifically, the state, local and federal taxes levied on fuel.

No one loves paying taxes, but they can't be blamed for the run-up in gas prices. The 18.4-cent-per-gallon federal tax on gas hasn't been increased in more than three decades.

Some states may even opt to temporarily lower their own fuel taxes if the current price spike drags on for long enough. That happened the last time a big geopolitical crisis caused a steep rise in gas prices, when Russia invaded Ukraine in 2022.

3. Other factors determining the price of gas

The remaining factors controlling gas prices are a mix of related costs:

• Refining crude into gasoline and other fuels
• Transporting it to stations by pipeline and truck
• Marketing gas

This bucket of costs includes refiners' profits on turning barrels of oil into barrels of gasoline, diesel and other fuels, and these days, those profits are soaring. Some refineries closed due to the slump in fuel demand during the pandemic, which means bigger profit margins for those that remain, now that demand is back to normal.

If you want to share in some of those profits as an investor, instead of just funding them as a driver, learn how to find the best energy stocks. Maybe they will provide some comfort during your next expensive fill-up.

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As it becomes increasingly painful to fill up your gas tank, you might well be wondering: Will gas prices go down at some point?

Energy prices feel like they've been on a never-ending ride higher of late. A year ago, the national average price of regular unleaded was $3.07 per gallon, according to travel website AAA. A month ago, it was $4.59. Today, it's $4.96.

We recently looked at the reasons why gas prices are so high. Global oil demand rebounding from the pandemic faster than production. The war in Ukraine. Efforts in the U.S. to transition the economy away from reliance on fossil fuels. Energy companies' reluctance to invest in more oil production.

Now, we'll try to answer the question undoubtedly on many drivers' minds: Will gas prices go down soon – and if so, what will do the pushing?

Fuel Tax Relief?

Taxes are one of several things that help determine the cost of gas. So a few states have tried to ease the financial burden on their residents by suspending their state fuel taxes for a short period. But are gas prices doing down because of those moves?

Not really.

For instance, Connecticut suspended its 25-cent-per gallon state levy on fuel for April, May and June. But according to AAA, the average price of regular unleaded in the Nutmeg State today is $4.92, up from $4.69 a month ago. Increases in crude oil prices can swamp the effect of suspending a state's gas tax. And when those state taxes are paused, the savings don't all go in the driver's pocket. Fuel sellers keep some portion of them.

Could the federal government give drivers nationwide a tax cut by suspending the 18.4-cent-per-gallon federal tax on gas, as President Joe Biden just proposed? Unlikely, report my colleagues at The Kiplinger Letter, who regularly speak with lawmakers on Capitol Hill to assess which bills have a chance of passing.

In the case of a proposed suspension of the federal gas tax, Democrats, the majority party, can't agree among themselves to do it.

More Oil on the Way

Here's a little good news: More crude oil should be reaching the global market later this year, which means more gasoline and other refined fuels. Eventually, that should help push gas prices down, or at least keep them from rising so fast.

In the U.S., energy companies are slowly putting more rigs to work drilling new wells, even as they prioritize returning cash to investors via share buybacks and dividends. Oilfield services company Baker Hughes reports on the number of working rigs in the U.S. each week, and most weeks lately, the tally has risen a bit. Meanwhile, OPEC announced recently that it will export a bit more oil than it had previously planned.

The bad news: Neither domestic oil output nor OPEC's sales are rising fast enough to push oil prices down much now. And that means gas prices are unlikely to take a big breather soon, either.

So, when can we expect gas prices to go down?

A Short Respite Soon, But Look Toward Autumn

A tiny bit of relief at the pump is likely in the next few weeks. In fact, the national average price of gas has already pulled back a few pennies, though it remains near $5 per gallon.

More declines are likely, because crude oil futures traded on commodity markets have recently given up some of their spring gains on concerns that the economy is weakening. That slack should filter through to gas stations in coming weeks, with the national average price of gas slipping to $4.75 or even a bit less.

That's still painfully high, but it's better than $5.

A good bet for when gas prices will go down more significantly is the fall, if seasonal patterns hold up this year.

Before COVID-19 scrambled those patterns, gas prices would typically rise in spring, peak sometime around Memorial Day, ease a bit but stay high during the summer, then pull back sometime after Labor Day.

As post-pandemic life gets back to normal, that pattern could return this year. Heavy summer travel and the resulting heavy demand for gas are likely to ebb by late summer or early fall as kids go back to school. By then, the Federal Reserve's interest rate hikes will have had some time to slow the overall economy, which should weigh on oil demand, too. OPEC should be pumping more oil then, as will the U.S., continuing the slow rebound in production from the pandemic-induced slump.

That might not be much comfort to motorists as they pay for expensive fill-ups this summer. But unless an economic recession comes along soon and crimps demand for fuel in painful fashion, high gas prices probably won't go down anytime soon.

Drivers in 2022 face an increasingly painful experience every time they fill up their gas tanks. National-average regular unleaded gas prices sit at $5.01 per gallon as of this writing – up 3.1% from $4.87 just a week ago, up 53% from $3.28 at the start of the year and 63% higher than the $3.04 national average a year ago.

Why are gas prices rising so much? And when will gas prices go back down again?

Let’s explore some of the drivers behind higher gas prices, then delve into whether there’s any relief in store for consumers at the pump.

COVID Crushed Oil Demand … Then Crushed Oil Production

No single person, company or even government controls gas prices. Instead, there are several reasons why Americans are facing increasing pain when they fill up their vehicles.

First, blame the COVID-19 pandemic, which threw oil markets severely out of whack two years ago. They still haven’t fully recovered from the damage the virus inflicted.

When COVID first hit, it put a deep dent in global oil demand as many normal activities shut down and millions of people who usually drive to work stayed home. As a result, crude oil prices plunged. In fact, at one point in April 2020, benchmark West Texas Intermediate crude prices actually fell below $0 – something that would normally seem impossible.

With oil demand so weak due to COVID-19 restrictions, places to store unwanted crude filled up, and traders in oil futures scrambled to unload their positions in crude. Eventually, some had to pay buyers to take future oil deliveries off their hands.

Negative prices didn’t last long, but oil stayed very cheap for much of 2020. That led energy companies and major oil exporting countries in OPEC to slash their production because no one wanted to give away barrels of oil at such rock-bottom prices.

Since then, the world has slowly gotten through the pandemic, and oil demand has come roaring back, especially in the U.S. Unsurprisingly, consumers who missed out on travel and other normal activities in 2020 and 2021 are making up for lost time now. U.S. oil demand is about back to where it was pre-COVID. But oil production takes a lot longer to restart than oil consumption.

Idled wells can’t be easily restarted. Drilling new wells takes time. And oil producers have been cautious about opening the taps quickly, lest a new price drop burn them again. Here in the U.S., oil output has only partially recovered from its 2020 drop. OPEC and its partner nations are only gradually restoring the exports they took off the market during the worst of the pandemic.

But that’s not the only reason gas prices are going up.

War in Ukraine Threatens Russian Oil Exports

That mismatch between supply and demand helped push oil higher throughout 2021. Then they got another major boost early in 2022, when Russia invaded Ukraine.

Among oil-producing nations, Russia ranks behind only the U.S. and Saudi Arabia, supplying roughly 10% of the world’s oil needs. Western sanctions have cut off some of that supply, more sanctions targeting Moscow’s oil sales may be coming, and many western energy companies are voluntarily shunning Russian oil.

All this has sent crude oil prices to around $120 per barrel, which in turn pushed the average price of regular gas well above $5 per gallon this spring.

U.S. Trying to Move Away From Oil

Then there are the political factors that have contributed to higher gas prices.

President Joe Biden came into office vowing to transition the U.S. economy away from fossil fuels, with a goal of halving emissions from energy use by 2030 and making the U.S. carbon-neutral by 2050. The administration has continued to approve permits to drill for oil on federal lands – angering many environmentalists – but it has also tried to cut back on where energy companies can drill for oil in the future.

Plus, it famously nixed the disputed Keystone XL pipeline, which would have carried more than 800,000 barrels per day of Canadian crude to U.S. refineries. That oil can still cross the border, but it’ll have to come by rail, which is more expensive than moving by pipeline.

In short, the administration has been less friendly to oil production and transport than its predecessor, at a time when markets are undersupplied. How much that adds to the price you pay at the pump is impossible to say, but it’s a factor.

Energy Companies Not Rushing to Drill

Even now, with prices soaring, energy companies are being cautious about ramping up their oil output. They’re slowly putting new rigs to work drilling more wells, which helps. But they’re also limiting how much they invest in new production so that they can reward their investors with bigger dividends and stock repurchases.

That’s good for stockholders. But it means less money going toward pumping more oil, which isn’t great for consumers.

Will Gas Prices Go Down Soon? Well …

Unfortunately, it doesn’t look like gas prices are going to head much lower anytime soon.

The war in Ukraine shows no sign of ending, global oil demand is straining available supply, and Wall Street wants publicly traded energy companies to grow their production slowly so that they can keep returning cash to shareholders.

Indeed, earlier this year, we said that "we could take a run at $5 per gallon for the national average." Now that that has happened, it looks like gas prices could peak somewhere around $5.25 to $5.50 per gallon this summer.

At this point, only an economic recession caused by the Federal Reserve’s coming interest rate hikes – which some economists are starting to warn about – would be able to really lower gas prices.

And that’s probably not how anyone wants to save money at the pump.

After more than a week of international affairs monopolizing Wall Street's spotlight, attention shifted back to interest rates as Federal Reserve Chair Jerome Powell telegraphed the answer to one of investors' most pressing questions – and lit a fire under stocks.

In prepared testimony to the U.S. House Committee on Financial Services, Powell said he's "inclined to support a 25-basis-point rate hike" at the next Federal Open Market Committee meeting, set for March 15-16.

While Powell provided plenty of hedging language – saying the economic implications of Russia's invasion were "highly uncertain" and leaving the door open to a 50-basis-point increase in the Fed funds rate later in 2022 if rapid inflation persists – his comments largely shut down worries about a 50-basis-point hike in March that had contributed to recent equity selling.

"I think we should assume one hike at every meeting this year, or seven total," says Kiplinger Economist David Payne. That adds up to the same total increase of 1.75 points previously forecast, but with slightly different timing.

"With inflation at a multi-decade high, the Fed is anxious to get off of a crisis footing," adds Bill Adams, chief economist for Comerica Bank. "The Fed will try to cool demand enough to get inflation under control, but not choke off the recovery."

Investors also cheered a better-than-expected private-sector employer report, with ADP announcing that payrolls increased by 475,000 in February, easily topping estimates for 375,000 – and more shockingly, that January's 301,000 payroll losses were revised to 509,000 additions.

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Peter Essele, head of portfolio management for Commonwealth Financial Network, noted that February's release showed small businesses (1-49 employees) experienced their first decline in jobs since April 2020, while large businesses (500+ employees) showed their third largest monthly job gain in 10 years.

"The dynamic in February is the extension of a trend that began in August 2021, where large business employment began to outpace small and medium business hiring in the recovery," he says. "The trend may reflect changing preferences in the labor force, with workers pivoting toward larger-scale businesses that potentially offer more benefits and higher wages."

Ninety-two percent of the S&P 500's components, and every one of its 11 sectors, finished in the green, pushing the index 1.9% higher to 4,386. The Dow Jones Industrial Average (+1.8% to 33,891) and Nasdaq Composite (+1.6% to 13,752) also closed well in positive territory.

Other news in the stock market today:

• The small-cap Russell 2000 had itself another solid day, up 2.5% to 2,058 to post its fourth gain in five sessions.
• A weekly decline in domestic crude inventories and reports that the Organization of the Petroleum Exporting Countries (OPEC) will continue to gradually increase output sent U.S. crude oil futures spiking nearly 7% to $110.60 per barrel – their highest settlement since May 2011. "I would expect the run higher in oil prices to continue through the course of 2022," says David Keller, chief market strategist at StockCharts.com, though he adds that "many energy names appear overextended and due for at least a brief pullback before resuming their uptrends."
• Gold futures fell 1.1% to settle at $1,922.30 an ounce.
• Bitcoin slipped 1.0% to $43,826.77. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Nordstrom (JWN) stock shot up 37.8% after the department store reported fourth-quarter earnings of $1.23 per share on $4.5 billion in revenue – beating analysts' estimates for earnings of $1.02 per share on $4.4 billion in sales. The company also noted improving sequential sales in its off-price division, Nordstrom Rack, and gave higher-than-expected guidance for fiscal 2022. Still, CFRA Research analyst Zachary Warring maintained a Strong Sell rating on the retail stock. "We do not believe JWN can achieve numbers anywhere near their guidance for fiscal 2022 after earnings per share of just $1.10 in fiscal 2021 after massive government stimulus and unprecedented pent-up demand. We would steer clear of shares that trade at 8.0x JWN's earnings-per-share guidance for fiscal 2023."
• Salesforce.com (CRM, +0.7%) reported solid fourth-quarter results Tuesday night, bringing in adjusted earnings of 84 cents per share on $7.3 billion in revenue. This exceeded analysts' estimates for 75 cents per share and $7.2 billion, respectively. CRM also guided for higher-than-expected revenue in both the current quarter and the full fiscal year and expects to see $1.5 billion in sales from Slack in fiscal 2023. "Given how deep its relationships are with its customers, Salesforce will continue to do well in the current financial environment," says Chris Rothstein, CEO and founder of Groove, the leading sales engagement platform for enterprises using Salesforce. "As economic uncertainty and inflation continue to drive down multiples for tech companies around the world, Salesforce is uniquely positioned to be able to take advantage of the situation."

Buying and Holding? Consider These 7 Funds

We've mostly spent the past few weeks exploring ways to either defend yourself from recent volatility or take advantage of the market's bobbing and weaving.

But for many buy-and-holders, the name of the game during times of tumult is … well, business as usual: Hold on to what you believe in, sell what you don't, buy when opportunity (and value) strikes.

One aspect of maintaining this kind of a portfolio is ensuring you have a solid portfolio core of diversified exposure to the market's basic flavors. We've long touted our Kiplinger 25 mutual funds and Kip ETF 20 to get the job done, but investors with fund-provider loyalty can often find all the tools they need within the very same family. Take American Funds parent Capital Group, which recently made a splash in the ETF world with six actively managed core-portfolio offerings.

However, buy-and-holders also may want to add "satellite" holdings – smaller positions meant to generate outperformance, and again, some fund families have a wealth of options available.

State Street Global Advisors, for instance, is one of the top ETF providers in the game via its SPDR family of funds, with nearly 140 ETFs available in the U.S. alone. We've winnowed down its wide selection down to seven SPDR ETFs that are ideally suited for buy-and-hold portfolios.

It's no secret that much of Wall Street is adopting a green-is-good investing mentality to combat climate change. But that doesn't mean less environmentally friendly, old-style oil and gas stocks can't speed ahead from time to time. That's just what has happened in recent months.

Thanks to supply shortages and a rise in demand for fossil fuels as the economy recovers, large-company energy stocks have gained 60% since the start of 2021. That's more than double the 27% rise in the S&P 500 and tops all other market sectors. And it comes after a disastrous 2020, when energy stocks plunged 34% – the sector's worst return in a calendar year in more than a decade.

The resurgence of old-economy energy stocks comes as U.S. oil prices skyrocket. West Texas Intermediate crude prices recently hit their highest level since 2014 and topped $85 per barrel. And natural gas prices more than doubled in the first 10 months of 2021.

In the past, these sharp price spikes have been bullish for energy stocks. Energy was the top-performing S&P 500 sector in 2007 and 2016, for instance, when WTI prices surged 58% and 45%, respectively, in those calendar years.

Many investment firms and the U.S. Energy Information Administration (EIA) are forecasting higher energy prices to persist in 2022, which bodes well for fossil fuel energy stocks, even as the world is focused on going green. We'll explain why and tell you the best way to make a strategic investment in this sector. Returns and data are through Nov. 5, unless otherwise noted.

A Suppy and Demand Mismatch

What's revving up fossil fuel prices?

For starters, bad weather and lower oil production have hurt supply. Hurricane Ida hobbled operations in the oil-rich Gulf of Mexico in late August, and snow and ice storms in early 2021 froze natural gas pipelines in Texas, which produces 25% of U.S. natural gas, the EIA says.

On top of that, OPEC, the 13-country oil cartel, has been slow to bring crude production back to pre-pandemic levels since its record cut in spring 2020 of 10 million barrels per day (roughly 10% of the global oil supply). Analysts say OPEC production won't recover to pre-COVID levels until mid-2022. Until then, scarcity should keep oil prices elevated.

The world's shift to clean energy and investors' growing preference for companies that score high on ESG (short for environmental, social and governance) measures are crimping supply, too.

Investors have pressured traditional energy companies to spend less on new oil wells and other fossil fuel projects and instead reinvest profits into buying back shares and paying bigger dividends. Oil and gas execs have been "beaten over the head by investors and ESG proponents who say, 'stop the development of fossil fuels,'" says Stewart Glickman, energy analyst at CFRA, a Wall Street research firm.

It's part of the reason why the number of active rigs drilling for oil and gas in the U.S. is down 50% from their recent peak level in late 2018, according to Baker Hughes, a company that provides oilfield services to drillers. The dearth of domestic energy production should exacerbate fossil fuel supply shortages in the coming months.

Meanwhile, demand is on the rise, thanks in part to the economic recovery. The International Energy Agency, a Paris-based organization that advises countries on energy policy, projects global oil demand to recover to pre-COVID levels by the end of 2022. Add that to short supply, and what you have is "a perfect storm" that supports higher energy prices, says Mark Haefele, chief investment officer of UBS Global Wealth Management.

A Bumpy Transition to a Net-Zero Economy

Clean energy isn't ready to take over from fossil fuels, and that's also good for oil and gas companies in the near term. Renewables currently lack the bandwidth to supply enough power when demand spikes. And clean energy is also vulnerable to weather. If the sun isn't shining or the wind isn't gusting or the rain isn't falling, the renewable-energy grid becomes less reliable and more vulnerable to intermittent outages.

What's more, the buildout of wind farms, solar infrastructure and renewable-energy storage solutions hasn't been big enough – so far – to make up for the reduced investment in fossil fuel projects.

"We lack the ability to count on renewables in the same way we can count on fossil fuels," says CFRA's Glickman. All told, these shortcomings lead to periodic energy price spikes that cause oil and gas stocks to rally.

Energy Stocks Have Plenty of Gas Left in the Tank

The long-term investing outlook favors green-friendly energy firms, but shares of oil and gas companies tend to perform well in periods, like now, when crude and natural gas prices are on the rise and demand is outstripping supply. Energy sector analysts at BofA say crude could top $100 a barrel this winter if temperatures plummet, a roughly 20% jump from current prices.

And profits are rising. In 2022, analysts expect 30.2% profit growth for energy firms year-over-year, outpacing the broad market's 7.5% increase, according to earnings tracker Refinitiv. In recent earnings calls with analysts, executives at oil services firms Halliburton (HAL) and Schlumberger (SLB) described the recovery in their businesses as a "multiyear" event.

Another plus: Energy stocks are cheap. The S&P 500 energy sector trades at 12.3 times estimated 2022 earnings, compared with a P/E of 21 for the broad market, according to S&P Dow Jones Indices. Will Riley, comanager of Guinness Atkinson Global Energy, says current prices of energy stocks don't fully reflect the earnings benefits that companies typically derive from the sharp run-up in crude and natural gas prices.

If you're thinking of adding fossil fuel companies to your portfolio, a tactical, diversified approach is best. To gain broad exposure to old-economy energy names, consider Energy Select Sector SPDR ETF (XLE, price $58, expense ratio 0.12%), which owns oil giants such as Exxon Mobil (XOM), as well as companies with gas and oil reserves, such as EOG Resources (EOG) and Pioneer Natural Resources (PXD), and oil services firm Schlumberger. Over the past 12 months, Energy Select Sector SPDR ETF has returned 106%.

The biggest beneficiaries of rising energy prices are the companies that "own the oil and gas under the ground and sell it when it comes to the surface," says CFRA's Glickman. That makes iShares U.S. Oil & Gas Exploration & Production ETF (IEO, $66, 0.42%) and First Trust Natural Gas ETF (FCG, $19, 0.61%) attractive now. Both funds track a broad index of shares in companies that generate the bulk of their revenues from oil and natural gas, such as ConocoPhillips (COP), EOG Resources and Occidental Petroleum (OXY). The iShares fund has gained 159% over the past 12 months; the First Trust Natural Gas ETF is up 214%.

And don't rule out fossil fuel com­panies that are taking meaningful steps to reduce harmful emissions. BofA highlights stocks with this kind of upside, including Chevron (CVX), Devon Energy (DVN) and ConocoPhillips.

Finally, we're not turning our backs on renewable energy. We view this area of the energy sector as a solid long-term, albeit volatile, investment. Consider SPDR Kensho Clean Power ETF (CNRG, $110, 0.45%) and Invesco WilderHill Clean Energy ETF (PBW, $92, 0.61%), which is a member of the Kiplinger ETF 20 list of our favorites.

Stagflation: that ghoul from the era of shag carpet and disco balls.

It's something that hasn't been seriously discussed in economics circles since the late 1970s. But today, with inflation pushing multidecade highs and company after company reporting that results might end up being disappointing over the next several quarters due to rising labor and materials costs, stagflation is a real topic of concern again.

The question is: Should it be?

What Exactly Is Stagflation?

First things first: Stagflation is the combination of high inflation with sluggish growth. It's the unholy union of stagnation and inflation, and it's the definition of economic misery.

In fact, it was during the stagflationary '70s when economist Arthur Okun created the "Misery Index": the simple sum of the consumer price inflation rate and the unemployment rate.

This isn't how economics is supposed to work. Inflation is supposed to be the price we pay for growth, and high unemployment or other measures of stagnation are the tradeoff we have to accept for keeping inflation low.

Having both at the same time is a nightmare because anything you do to slow inflation, such as the Federal Reserve raising interest rates, makes the stagnation worse … and anything you do to stimulate growth makes the inflation worse.

What Causes Stagflation?

There are similarities between the 1970s and today, but there are also some key differences. But to understand this, you first have to understand that there are two kinds of inflation: demand-pull and cost-push.

Demand-pull inflation is generally when you get when the Fed gooses the money supply or Congress cuts taxes. This is the inflation you get from excessive demand. When we're all buying at the same time, prices rise. If there is such a thing as "good inflation," this would be it.

Cost-push inflation is another story. This is what you get when supply is limited. Think about housing today or crude oil prices during the OPEC embargoes of the 1970s.

The causes of stagflation of the 1970s were complicated. You had demand-pull inflation due to dovish Fed policy and from the government spending on new social programs and the Vietnam War. And you also had cost-push inflation driven by the oil embargo and by generally rising commodity prices. But we also had a major productivity problem. By the 1970s, the industrial model that had been in place since the New Deal had gotten stale, and the U.S. was in the early stages of deindustrialization due to competition from leaner competition from Japan and elsewhere.

Things got bad. But then they got better.

President Jimmy Carter started and Ronald Reagan massively accelerated the trend of deregulation and privatization, which boosted productivity. The country evolved into a productive service economy. OPEC lost its grip on the energy market. The Fed got better at policy. And we no longer had a Vietnam War to pay for. Stagflation gave way to higher growth and falling inflation.

Today, we also have major demand-pull inflation due to low interest rates and COVID relief efforts that put money into American pockets and, for a stretch, incentivized workers to stay at home. Getting Americans back to work has been a challenge and led to rising wages.

Meanwhile, we have plenty of cost-push inflation due to the post-COVID supply chain being a wreck. Everything from lumber to microchips is in short supply, leading to price spikes.

Why Stagflation Won't Last

Supply chain disruptions won't last forever. This might very well be a lean Christmas, but eventually the supply chains will be "fixed." Prices might not fall tomorrow, but as supplies get back to something resembling normal, they will moderate.

Meanwhile, we live in a world awash in energy. OPEC does not have the power to control energy prices on a whim the way they did in the 1970s. When prices get high enough, new supply floods the market from American shale producers and other non-OPEC members. And we haven't even mentioned the rise of solar, wind and other renewable energies.

And as for labor, American workers should enjoy their windfall today because it won't last. Automation is replacing labor at the fastest rate since the Industrial Revolution, and the current labor shortage will only force companies to invest even more in automation to speed up the process.

This is not to say we live in a "just right" Goldilocks economy. It's entirely possible we see a recession in the next year if the great post-COVID recovery starts to lose steam.

But the risk of persistent stagflation is minor, as is (hopefully) the return of earth tones and horseshoe mustaches.

You never want to see "#stockmarketcrash" trending on Twitter, but that's the kind of day Thursday was – or at least, the kind of day it looked like it was shaping up to be.

Selling started with an initial unemployment claims report that showed last week's claims rise to 745,000, though Anu Gaggar, senior global investment analyst for Commonwealth Financial Network, reminds us to "take it with a grain of salt as there is some impact of the winter storm in Texas here."

"Despite the rise and upward revisions, the four-week moving average in initial claims ticked lower to 791k, from 808k previously," adds Barclays' Michael Gapen and Pooja Sriram. "Initial jobless claims backed up in December and January following reductions in mobility and additional restrictions on activity that went into place in November to counter the rise in new COVID-19 cases last fall."

But the drop-off accelerated after Federal Reserve Chair Jerome Powell told a Wall Street Journal webinar audience that although he acknowledged inflation could pick up further, the central bank was likely to stand pat on policy.

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The Nasdaq Composite plunged by as much as 3.4%, and in fact fell into correction territory (a 10% decline from a previous high) on an intraday basis, before recovering a little. It still closed off 2.1% to 12,723, on the back of large declines from Tesla (TSLA, -4.9%) and Nvidia (NVDA, -3.4%), among others.

The Dow Jones Industrial Average (-1.1% to 30,924) and S&P 500 (-1.3% to 3,768) also finished in the red, though well off their lows.

Other action in the stock market today:

• The small-cap Russell 2000 dropped 2.8% to 2,146.
• Gold futures were off 0.9% to $1,700.70 per ounce.
• U.S. crude oil futures jumped by 4.2% to $63.83 per barrel after OPEC+ nations agreed to continue their production cuts into next month.
• That helped the energy sector lead again today, as evidenced by a 2.4% gain in the Energy Select Sector SPDR Fund (XLE), helped by a 3.9% surge in Exxon Mobil (XOM). The XLE is now up 35% year-to-date.
• Bitcoin prices, like the rest of the market, dipped but finished off their lows, declining 5.4% to $48,329. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

The Smart Money Says to Keep Calm

Inflation worries certainly have the market's reins at the moment, but the tone from many market experts is: patience.

"Listen, the S&P 500 gained more than 75% and has started to weaken recently. Yes, the Nasdaq is nearly in correction territory, but the truth is this is how it works. Stocks are allowed to take a break," says Ryan Detrick, chief market strategist for LPL Financial. "The bright side is the economy continues to improve and leadership from financials and energy is something that suggests this isn't a 'sell everything' moment."

"There's a growing worry that the economy may be running away from the Fed. We understand that change can be nerve-wracking. And higher yields tend to hit high-flyers harder," adds Lindsey Bell, chief investment strategist for Ally Invest. "Keep calm for now. We don't think this drop is the beginning of something bigger, especially considering the strong trends in earnings and the economy. This might just be a healthy step back for a market that's rallied strongly since November."

Indeed, Bell suggests that if you've been raising a little cash, now might be the time to put some of that to work on suddenly discounted stocks – a strategy we've suggested investors take with these 10 growthy S&P 500 stocks, as well as these five travel stocks that might have gotten a little ahead of themselves.

You could also do the same in companies that are just a little farther afield. Many emerging markets such as China and Taiwan are also pulling back after a red-hot recovery rally, offering better prices on attractive names there.

If you're looking for pullback plays and want the added benefit of a little geographical diversification, consider these five large-cap emerging markets stocks that still have lots of upside to spare.

Kyle Woodley was long NVDA and Bitcoin as of this writing.

This spring, commodity traders and investors in energy stocks around the world looked on with astonishment at oil prices.

In April, West Texas Intermediate crude oil futures went negative for the first time in history, hitting -$37.63 on April 20, shocking global markets. One day trader ended up incurring a $9 million paper loss, as quote screens at brokerage firms like Interactive Brokers, were not programmed to go below $0. (IBKR's issues resulted in a $113 million loss for the firm, Interactive Brokers CEO Thomas Peterffy said.)

However, oil prices, like the broader stock market, did not stay depressed long; futures rebounded sharply, with West Texas Intermediate currently selling around $43 per barrel, and Brent (international) around $46 per barrel. Global demand is also normalizing at about 10% lower year-over-year, though the pace of recovery has been slower than the industry previously anticipated.

So what does this mean for investors in energy stocks?

Oil Prices Are at a Pivot Point for Global Producers

The good news is that between OPEC production cuts and reduced U.S. output, the crude market is broadly balanced.

The bad news: With Brent above $45 per barrel, OPEC might change course from a price-control strategy (production cuts) to a market-share strategy (pump more oil to keep U.S. producers from hedging forward).

A second risk to oil prices is if American producers find a forward curve at $45 attractive enough to resume drilling. The forward curve allows a producer to sell his oil out into the future at an agreed-upon price derived by the market today. But those barrels need to be stored until that future date, so the producer has to add those potential costs into the equation to determine if that future price is feasible.

An oil price high enough to allow American shale producers to continue to pump, store, and sell into the future is exactly what the Russians want to avoid.

As of June 2020, there were 5,729 drilled-but-uncompleted wells in the U.S.; in other words, a tidal wave of U.S. production is just waiting for the right price to rain down on this fragile market. Shale producers have debt obligations to the banks that financed their operations. But when prices are too low to cover costs of production and storage, shale producers can't use that forward curve to sell oil out into the future. That means making a difficult choice between shutting down production or possibly defaulting on debt obligations.

That's the outcome the Russians are hoping for: Keep oil prices just out of reach of shale producers' ability to sell forward, and force them to shut down production.

Russia's Warning

Russian officials have signaled that they would hedge above $45 per barrel. (Hedging is when producers sell their oil forward in the futures market to "lock in" a specific price.) Most likely, they were indicating to OPEC (specifically, Saudi Arabia) that they didn't want to see OPEC production cuts sponsor a recovery in U.S. shale.

In other words, this is an implicit warning from Russia to OPEC: "Kill shale, or we will hedge forward and turn up production, sending prices plunging."

The global oil market involves plenty of game theory for major producers. OPEC, non-OPEC and U.S. producers all work with and against one another based on their competing (but sometimes joined) interests. What one major producer like Russia does has domino effects for the others.

Russia signaling a major hedge at $45 could spook other large oil players such as Mexico, the 11th-largest oil producer, to move as well. Mexico desperately needs a stable oil income to meet its government expenditures. In Mexico's case, it might hedge to set a floor on their oil should futures contracts dip again like they did earlier this year.

Despite these headwinds, oil majors still look very attractive to those with a three- to five-year investment horizon. Even a hint of a working COVID-19 vaccine would see energy stocks fly higher. Eventual coronavirus relief, coupled with trillions of dollars in global stimulus, eventually will lead to inflationary pressures, which will make oil companies a must-have in any portfolio.

Additionally, regardless of who sits in the Oval Office come 2021, a large fiscal stimulus package seems likely, which will make energy stocks – along with agriculture and commodity plays in general – an attractive buy.

One Energy Stock for This Climate

Long ago, BP (BP, $21.14) changed its name from British Petroleum to Beyond Petroleum. It has heavily invested in renewables and is far ahead of its major peers in the renewable space. Thus, while it's still a major oil player, BP also is well-positioned to benefit from an inevitable move to renewable energy.

BP is, like most energy companies, reeling from 2020's plunge in oil prices. On Aug. 4, the company announced it had cut its dividend by 50% to 5.25 cents per share quarterly, pledging to use the remainder of its near-term cash flow to pay down debt. While the dividend cut is disappointing to investors, BP has pledged to keep the remaining dividend (which yields 5.9% at current prices) stable, and the move to reduce debt is a responsible one.

That announcement came along with second-quarter earnings that realized $19.06 per barrel, compared to $40.64 a year ago. But with oil prices back in the mid-$40s, BP should see a notable uptick in Q3 earnings that doesn't seem to be reflected in share prices currently.

One bright spot in BP's second-quarter report was its alternative energy unit. The company maintains 923 megawatts of wind energy capacity, as well as 2.2 gigawatts of solar capacity with plans to expand to 10 gigawatts by 2023. The Southeastern Pennsylvania Transportation Authority recently signed an agreement with BP to purchase 67,029 megawatt-hours of electricity that will be provided by two solar plants in Franklin County, Pennsylvania.

The alternative energy unit is much smaller compared to the company's oil and gas operations, and BP still will be largely reliant on fossil fuels for the foreseeable future. But BP's leading position in the renewables space makes it more diversified compared to its peers, shielding it from an uncertain future in fossil fuels.

A Biden presidency would only accelerate investments in renewables, benefiting BP. But regardless of who occupies the White House, an eventual move to renewables is a foregone conclusion.

Budget-minded travelers often plan their vacations months in advance so they can find the best deals. But if you’re yearning for a last-minute summer or early fall getaway, there’s good news: Fuel prices are relatively low, and you can find good deals on airfares, as long as you know where to look. You have more options for places to stay, too.

Kiplinger expects gas prices to run about the same this summer as last—fluctuating between a national average price per gallon of $2.80 and $2.85 through the summer months and declining a bit after Labor Day. Wild cards in the forecast include a hurricane disrupting refineries on the Gulf Coast, or OPEC and Russia failing to agree to maintain their current oil production quota. To plan your trip, budget for gas and find current gas prices along your route, use AAA’s TripTik Travel Planner or the AAA Mobile app (both are free, with a couple of features available to members only).

Despite the temporary grounding of Boeing’s 737 Max planes, you can find deeply discounted airfares this summer, thanks to lower-cost jet fuel, says Tracy Stewart, content editor of airfare-deal site Airfarewatchdog.com. Stewart has seen round-trip fares from the U.S. to Barcelona as low as $280 and to China for less than $400. He doesn’t think the recent closure of Wow Air, a budget airline based in Iceland, will have much impact because many of the cities it served here and abroad have low-cost alternatives.

Don’t rely solely on the big travel sites—such as Expedia, Google Flights, Kayak and Orbitz—to get the best deal. Airlines have enhanced their websites and apps in an effort to sell directly to customers, says Brian Sumers, senior aviation business editor at Skift.com, a travel industry news site. You also risk overlooking some good fares: Southwest lists only on its own site, and United Airlines has threatened to stop doing business with Expedia Group on September 30.

To get the best fares, sign up for fare alerts, compare prices on the search sites, and then book directly through airlines’ websites. Be flexible on dates and destinations. Midweek flights can cost hundreds of dollars less than weekend flights. If you’re flying to Europe, you could save money by focusing on getting across the ocean as cheaply as possible—say, to London or Barcelona—then book a secondary flight on a budget regional carrier to your destination.

A home with frills. Though you can find good deals on international airfares, you may get the best deals on lodging by staying closer to home. Lodging prices domestically are expected to rise by 2% to 2.5% from last year, says Henry Harteveldt, a travel industry analyst with Atmosphere Research Group. Global Business Travel Association and Carson Wagonlit Travel expect lodging prices in the Asia-Pacific region to rise by 5.1% and Western Europe by 5.6%.

If you like the idea of staying in a home rather than a hotel but want more amenities than the typical home-sharing service offers, you have a new option. In April, Marriott launched Homes & Villas by Marriott International, with 2,000 premium and luxury homes in the Caribbean, Europe, Latin America and the U.S. Book through HomesandVillasbyMarriott.com. Marriott Bonvoy program members will earn points and can redeem them, too.

Energy stocks have had a difficult 2018. Mostly flat performance through most of the year turned into a tailspin in October as oil prices plunged from above $75 per barrel to below $50. That in turn has pinched oil companies that rely on elevated commodity prices to drive larger profits.

The headwinds are clear. Demand has slowed to a crawl, and supplies have piled up despite production cuts from several nations. Fears about U.S.-China trade relations have weighed, as have worries about sanctions on Iran.

It’s no wonder why energy stocks have taken it on the chin.

But the skies are starting to clear as we head into 2019. OPEC and other nations are beginning to discuss additional output curbs, and with U.S. shale producers running at full capacity, there really isn’t much room for them to pick up any slack. The U.S. and China have made progress on trade talks, too, including a 90-day moratorium on increasing tariffs.

Investors diving into the sector still need to be choosy. A rebound in oil is far from a certainty, which means it’s necessary to put a premium on quality right now. Here, we look at the 10 best energy stocks to buy for 2019 – those that can best take advantage of the current energy environment.

Data is as of Dec. 3, 2018. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price.

• Market value: $340.8 billion
• Dividend yield: 4.1%

Most lists of energy stocks at any time include the biggest American player in the space: Exxon Mobil (XOM, $79.50). But Exxon hasn’t really felt like the king of late.

Believe it or not, Exxon is starting to fall behind some of its rivals in terms of reporting lower year-over-year production figures, and in terms of stock returns. That’s what makes the current oil-price environment so interesting for the integrated energy giant.

When oil prices crashed a few years ago, Exxon clamped down on capital expenses, reducing its capex by 25% to under $23 billion. It also ended its lucrative buyback program to preserve cash. The result of these moves was a clip in production; for instance, at the start of Q1 2018, total oil and gas production decreased 6% year-over-year. At the same time, rivals who kept the spigots going now have projects that are starting to gush.

But Exxon has a new plan. The energy major will push its capital spending from $24 billion in 2018 to $28 billion in 2019, and eventually get up to an average of about $30 billion between 2023 and 2025. Much of this will be focused on high-margin areas such as the Permian Basin or new prolific fields such as offshore operations in Guyana. Upside from the Permian already started to show up for Exxon in 2018, and Guyana should significantly improve its production within the company’s official target of five years.

Patient investors waiting for Exxon to realize its long-term potential will be paid a hefty 4% annually in dividends just to wait

• Market value: $230.1 billion
• Dividend yield: 3.8%
• Chevron (CVX, $118.94) is another Big Oil stock that has been thinking smaller of late. The oil rout of 2014-15 constricted the company’s cash flows and production figures, and ultimately led to questions about the company’s dividend. While CVX ultimately never cut it, Chevron did leave the quarterly dividend flat in 2015, only raised it 1 cent in 2016, then kept it flat again in 2017.

The foot-dragging was a necessity, as Chevron was being forced to lean heavily on asset sales and its balance sheet to fund capex spending and its dividend.

But now, Chevron’s benefitting from its lean-time strategy. Several big-name projects have come online to produce both crude oil and natural gas. Its Wheatstone and Gorgon liquefied natural gas (LNG) facilities are finally up and running, while several new fields in the Permian and in the Gulf are pumping out crude. In its Q3 report, Chevron announced a record quarterly production figure of 2.96 million barrels per day. This prompted an upgrade from Credit Suisse, which said CVX “continues to execute on its already superior growth outlook.”

Chevron is now pulling back on its capex spending to about $19 billion – down from the $25 billion to $30 billion it has spent over the past few years. That should pad the bottom line, giving the dividend a little more breathing room to grow.

• Market value: $53.5 billion
• Dividend yield: 4.4%
• Occidental Petroleum (OXY, $70.27) is a second-tier name in energy, but investors who pass it by on name recognition alone are losing out.

Occidental is considered a “mini-integrated” oil firm. It features plenty of up-, mid- and downstream assets, basically from wellhead to end user. It’s just not as huge as Exxon or Chevron, but neither is it a pure exploration-and-production player. It makes it more difficult for investors to evaluate.

But OXY could be a “Goldilocks” energy stock: not too big, not too small.

Occidental has long been a top producer in some low-cost regions. It owns 2.5 million net acres in the Permian Basin. Additionally, it has some major legacy assets in Qatar, Oman and the United Arab Emirates. This creates a very low-cost output profile that allows OXY to score big when oil prices rise. During its latest investor presentation, the company’s management should that its current cost structure should allow it cover CAPEX and increase its dividend with West Texas Intermediate oil – the primary American benchmark – at $50 per barrel.

On the flipside, Occidental’s refining assets focus more on chemical production rather than gasoline and fuels. Typically, chemicals and base-plastics have much higher margins than gas.

OXY has been able to generate five-year average free cash flows of around $1.2 billion, according to Morningstar data. This period includes the latest oil rout and shows that OXY’s mix of assets can keep it and investors afloat in most energy environments.

• Market value: $137.4 billion
• Dividend yield: 6.1%

The Deepwater Horizon and its aftermath hounded international integrated giant BP plc (BP, $40.35) and its stock for years. One of the worst oil spills in history resulted in billions of dollars in fines, fees, lawsuits and compensation. The total bill to date is just under $62 billion.

To pay that bill, BP cut spending, sold off billions of dollars’ worth of assets and created a script dividend program in which investors were able to receive payouts in additional shares rather than cash.

Finally, though, BP is starting to leave the Deepwater Horizon disaster behind. Once it makes a few final small settlement payments in 2019, it will be freed from the massive financial burden – just in time.

BP’s focus has necessarily been squeezing out as much profit per barrel as possible. The company earned $3.8 billion in its third quarter, for instance, more than doubling its profits from the year-ago period. That builds on two previous quarters of strong profits. Said CEO Bob Dudley, “We now have a base business that can balance itself at $49 a barrel.” That’s important considering the current environment in crude prices.

BP’s cash has now returned to levels where it can cover a real dividend, as well as expand its capex. That should propel the dividend stock in 2019.

• Market value: $62.0 billion
• Dividend yield: 0.9%
• EOG Resources (EOG, $103.31) was fracking before it was cool.

Years ago – as Enron Oil & Gas – EOG was one of the first movers into the “Big Three” shale fields: the Eagle Ford, Permian and Bakken. That allowed it to build out some of the largest, choicest drilling locations in each field. That first-mover status in turn has helped it realize great mechanics and efficiencies from its wells.

Thanks to EOG’s superior quality of reserves, the firm boasts one of the lowest breakeven costs in the business. According to its latest management presentation, EOG can still pull a 30% direct after-tax rate of return (ATROR) from WTI-benchmarked oil at $40 per barrel. It makes 100% when oil gets up to $60 per barrel.

EOG used the current energy-price malaise to secure roughly 65% of its future well costs today. EOG Resources COO Lloyd Helms said during the latest quarterly earnings call that the current negotiated structure for services provides the company with “a great deal of flexibility to adjust our activity level in 2019,” and that “by doing so, we expect to reduce total well cost again in 2019.” Helms predicts its drilling costs will fall another 5% next year.

And any dip in costs will only help the bottom line.

• Market value: $78.5 billion
• Dividend yield: 1.8%

Leading independent E&P company ConocoPhillips (COP, $66.18) has had to make several hard decisions over the past few years that are finally paying off.

Those hard decisions included a dividend cut in 2016. The 66% haircut to the payout, as well as capex cuts, have turned out to be godsend, however. Conoco was one of the first oil stocks to get “lean and mean,” focusing its now-lower capital spending on top shale fields and other promising plays. Shale fields such as Bakken, Eagle Ford, and Permian Basin have well mechanics with breakeven costs as low as $35 per barrel. Conoco quickly has become one of the top dogs in all three of those regions with more than 1.8 million total acres under its control.

This has helped the bottom line, with COP reporting a more-than-350% year-over-year surge in its most recent quarterly profits. The three aforementioned fields saw production jump by more than 48%.

As a result, COP has resumed buybacks and started growing its dividend once more. With its latest increase, Conoco’s payout has grown 22% since it was slashed in 2016. And ConocoPhillips can continue to function well in today’s low-price environment.

• Market value: $14.3 billion
• Dividend yield: 1.2%
• Marathon Oil (MRO, $16.69) once was an integrated giant that owned both production and refining assets. Just like Conoco, MRO sought to rid itself of those refining assets, which were slow-moving and money-losing at the time. But that spinoff seemed ill-timed; Marathon was left without any downstream assets that could have taken advantage of the lower oil prices from the 2014-15 crash.

Marathon didn’t have the size advantage Conoco did, however. As oil plunged, investors took shares to the woodshed. At one point, you could buy MRO shares for around the price of an Extra Value Meal. Fearing oil would stay lower for longer, Marathon cut its capex budget by more than 20% and reduced its dividend by more than three-quarters.

MRO pruned assets, too, including selling its Canadian oil sands holdings that, as CEO Lee Tillman put it, “represented about a third of our Company’s other operating and production expenses, yet only about 12 percent of our production volumes.” It instead focused its attention on the Permian, as well as the Bakken and Eagle Ford. Today, more than 70% of Marathon’s production comes from U.S. sources. These low-cost fields are allowing MRO to balance capex spending and dividends at just $50 per barrel of WTI crude.

Marathon offers a similar gains profile to COP in the current environment.

• Market value: $13.2 billion
• Dividend yield: 1.2%

If you haven’t heard of Devon Energy (DVN, $27.03), you’ll be glad to learn about it now.

Devon originally was a natural-gas-focused firm, which was fine until nat-gas prices – thanks to fracking’s efficiency – tanked hard in the late aughts. DVN shares were put on the backburner.

To counteract this, Devon management plowed into a variety of shale oil plays including the Eagle Ford, as well as Oklahoma’s “STACK” region, Delaware Basin and in the Rocky Mountains. It also sold natural gas assets. As a result, 63% of its production (as of the end of 2017) comes from crude oil and NGLs.

This has been a boon operationally. Devon recently reported a big profit beat and produced $807 million in operating cash flow during the quarter. This fully funded its drilling program with about $250 million left over.

DVN shares have chronically underperformed the rest of the sector, anyway. But Devon could be a sneaky play. The company has a $4 billion share repurchase program that should finish in early 2019 – a program that will reduce its outstanding common stock by about 20% in total.

• Market value: $27.6 billion
• Dividend yield: 2.0%

The current oil-price environment means Anadarko Petroleum (APC, $52.90) has a target on its back yet again.

If you were to take Exxon and break it apart, Anadarko would be the part that actually pulls out the oil – and it does so all over the world. So if you were an Exxon or a Chevron and needed expand your own production profile, you could move the needle by acquiring APC. Moreover, the recent rout in energy stocks has made Anadarko more affordable at less than $30 billion.

There are several other reasons to believe an energy giant might come to the table and eat. Anadarko has reduced its costs and increased its percentage of crude oil production thanks to shale. Its operations are so good that their breakeven points are in the $20- to $30-per-barrel range. Across all assets, APC sees incremental cash flows above $50 per barrel. And with Anadarko recently selling off its midstream assets, it looks more like a pure E&P player every day. That’s exactly what a company like Exxon might want.

Even if a buyout doesn’t happen, APC’s continued improvements have resulted in shrinking losses. Moreover, the company – which had to reduce its dividend from 27 cents quarterly to 5 cents in 2016 – restored it to 25 cents in 2018, and even raised it up to 30 cents.

• Market value: $2.8 billion
• Dividend yield: N/A
• Chesapeake Energy (CHK, $2.92) is the most aggressive play on this list, and in fact, you could call it a “lottery ticket” stock. In fact, at just less than $3 per share currently, it’s priced like one.

Chesapeake’s low price is a result of numerous missteps.

Chesapeake is one of the biggest shale drillers of natural gas in the U.S. But to gain its size, it binged on debt. At one point, it had more than $21 billion in IOUs to its name. That wrecked Chesapeake when natural gas and oil cratered in 2014-15. The firm went on an asset-selling spree to raise funds so it could still drill while reducing that huge burden. It did clip that net debt down to around $9.4 billion – not great considering its total shareholder equity is around $3.4 billion, but it is a marked improvement.

Cash is improving, too. Higher-margin oil now represents around 19% of production. That helped Chesapeake record more than $504 million in cash from operating activities last quarter. Continued moves into shale have management predicting that 30% of its production will come from oil in 2019.

CHK is improving. There’s still a lot of risk – most notably, that debt – but it has the potential to be one of the bigger-reward energy stocks to buy in 2019.

The U.S. is near full employment and global economies are in synchronized growth mode. That's going to make life trickier for income investors, as these trends will spark higher interest rates, which will weigh on bonds and classic dividend plays such as companies that sell toothpaste. Fortunately, there’s a fix: Buy energy stocks.

Many energy companies not only deliver sizable yields, but they now have potential to grow again as energy prices rebound, powered by these drivers:

Growing demand. Expanding economies use more energy. Americans are driving bigger cars. And in emerging markets, more people are joining the middle class. They’re naturally demanding energy-hungry basic amenities, such as cars and electric lighting.

Slowing supply growth. As oil wells age, production naturally declines by as much as 5% a year overall, says Jonathan Waghorn, who helps manage the Guinness Atkinson Global Energy Fund (GAGEX). This means energy companies must run hard just to stay in place. However, when oil plunged a few years ago, big energy companies pulled back investments in projects that take a few years to develop. The “air pocket” of missing wells in the pipeline will bite into supply growth soon. Meanwhile, U.S. shale production, while prolific, is growing less than expected, says Mike Breard, an energy analyst at Hodges Capital Management in Texas. Also, the Organization of the Petroleum Exporting Countries’ (OPEC) compliance on production cuts has been great, and that’s not likely to stop, Breard predicts.

Political instability. It’s no secret that oil comes from countries wrought with political instability – and not just Venezuela, Nigeria, Libya and Iraq. Oil recently jumped when Saudi Arabia’s Crown Prince Mohammad bin Salman (MBS) locked up rivals in a domestic power grab. Investors worried his maneuver could spill over into regional conflict. The MBS oil price move may fade a bit. But the risk of political conflict that disrupts supply won’t.

Here are seven energy stocks to buy that should benefit from these bullish oil trends, while paying you annual yields of between 2% and 9%.

Data is as of Nov. 13, 2017. Stocks are listed in alphabetical order. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Click on ticker-symbol links in each slide for current share prices and more.

• Dividend yield: 3.7%

The starting point for anyone building an energy-sector dividend portfolio has to be Exxon Mobil (XOM, $82.89). This energy giant’s low cost of capital and savvy approach to building long-lived assets and reserves around the globe give it some of the best returns on capital in the business.

While Exxon Mobil lost its former CEO, Rex Tillerson, to the administration of President Donald Trump, it’s now in the capable hands of Darren Woods, who came up the ranks in the refining and chemical division. Under his leadership, Exxon Mobil recently announced it is spending $1 billion a year on green energy and biofuel research, though profitable breakthroughs may be years away.

More important to the here and now, Exxon has been investing more heavily “unconventional” shale plays in the Permian and Bakken, says Breard, of Hodges Capital Management. Since these wells can be brought online more quickly, this gives the company better flexibility to increase production when oil and gas prices rise. And unlike a lot of smaller exploration and production companies, Exxon Mobil isn’t just in upstream energy production – it has a huge presence in downstream refining and chemical manufacturing.

Together, these factors mean that Exxon Mobil generates strong and consistent cash flow even when oil falls – exactly what you want to see if you are investing in an energy company for dividends. Morningstar analyst Allen Good thinks Exxon can cover its dividend at oil prices as low as $40 per barrel. (However, a drop back to such levels seems unlikely.)

• Dividend yield: 6%
• BP (BP, $39.88) has a lot of debt. It’s still paying billions of dollars each year in fines for the 2010 Deepwater Horizon oil spill disaster in the Gulf of Mexico. And it’s selling off the family jewels to help cover these payments.If all of this makes you question the safety of the company’s 6% dividend yield, however, stop right now. BP announced a share buyback at the end of October, which is all we need to know about the dividend’s security. Companies don’t buy back shares when they are in danger of cutting dividends.

Thanks to cost discipline and higher oil prices, BP’s free cash flow has been growing substantially. Production grew 11% in the third quarter. Barring a sharp decline in oil, the company’s rich dividend yield is safe. By its latest estimate, BP has enough cash to cover capital spending and dividends when Brent crude oil is as low as at $49 a barrel. It recently traded for around $63.50 a barrel.

As for those Gulf of Mexico oil spill payments, they’re going to drop sharply to $2 billion in 2018 and a little more than $1 billion in 2019, from around $5.5 billion this year.

BP investors have the option of accepting dividends in “scrip,” or shares. Whether you take shares or cash is a personal choice depending on your cash flow needs and tax planning. But for some perspective, only about 20% of shareholders take stock.

• Dividend yield: 5.7%

Investor negativity on energy suggests money managers have vastly underweighted positions, says Jim Paulsen, chief investment strategist at the Leuthold Group. As fundamentals continue to improve, they’ll be forced to lift portfolio exposures, he says.

That will have them scrambling for the shares of companies like Royal Dutch Shell (RDS.B, $65.92).

Europe’s energy giant beat analyst expectations again in the third quarter, with a 47% increase in net profits to $4.1 billion. More importantly, for dividend investors, Shell continues to be a cash flow machine. Over the 12 months through the end of the third quarter, it produced $40 billion in operating cash flow (cash left over from operations, excluding capital expenditures and other investments). That was with Brent crude at an average of $51 per barrel – far lower than it is now. In contrast, dividends cost the company about $15 billion a year.

Shell also purchased energy firm BG Group in 2016, which gave it access to lower-cost assets, and the company subsequently targeted about $4.5 billion in merger-related savings.

Shell offers two share types: A-class American depository receipts, which fall under Dutch laws, or B-class ADRs, which fall under U.K. laws. Go with the B shares because you won’t have to pay Dutch withholding tax on the dividends.

• Dividend yield: 2.3%
• PetroChina (PTR, $70.20) is China’s state-owned exploration and production giant. The Chinese government owns 86% of its stock. For a lot of investors, that’s a show-stopper right there; they reason that PetroChina may exist to serve Chinese society as much as create shareholder value.

But there are advantages to being government-run. First off, PetroChina is a monopoly. The Chinese government restricts foreign companies from exploring inside its borders. This gives PetroChina an obvious leg up. Next, PetroChina owns the lion’s share of China’s oil and gas pipeline network, a cash machine. It’s spinning some of those pipelines off to raise capital, but maintaining a controlling stake. Abroad, PetroChina may get preferred access to energy reserves in countries where China’s government offers foreign aid, Breard says.

Besides, while investor sentiment on PetroChina has been negative – setting it up as a potential contrarian bet – there’s no reason to think it can’t benefit from higher oil prices as much as any company. To wit: PetroChina just posted a 291% increase in third-quarter profits at the end of October on a 17% increase in revenue, thanks to rising crude oil prices and cost controls. Despite the negativity surrounding this company, it’s reasonable to expect more of the same, if oil keeps moving higher.

• Dividend yield: 2.3%

Energy services company Baker Hughes sure came up with a clunky name when it merged with a portion of General Electric’s (GE) energy business last July. But the resulting company – Baker Hughes, A GE Company (BHGE, $31.88) – should be great for shareholders.

That’s because the company is under new management – and the business has plenty of room to improve. Baker Hughes has a “very long history of running its business poorly,” Morningstar analyst Preston Caldwell says.

Now it’s in the hands of Lorenzo Simonelli, an alum of GE, which prides itself in developing some of the best management talent in the world. This signals there’s a good chance Simonelli will work some magic, cut costs and boost profits. “We believe the upside is considerable,” Caldwell says.

Baker Hughes serves the booming U.S. shale sector, where growth will continue to be hot – especially if oil prices go higher. The company’s high-tech drilling and completion equipment will be in demand because it can carry out complex tasks, faster. “We continue to believe that our advanced drilling capabilities will differentiate us in the marketplace,” Simonelli told investors in the most recent conference call.

As an added plus, an insider recently purchased shares not too far below current prices. And the new Baker Hughes just signaled that it wants to play nice with shareholders – by launching a massive $3 billion share buyback which could eventually sop up 8% of its outstanding shares. This suggests the company will hike dividends regularly, too.

• Distribution yield: 8.6%

I love to follow insider buying to find ideas for my stock newsletter Brush Up on Stocks. Tallgrass Energy Partners (TEP, $44.19) first popped up in my system in May 2013, and I put it in my letter at $22.50. It now trades for more than $44. Nice returns, but there could be more to go because insiders still are buying.

CEO David Dehaemers Jr. has purchased $1.7 million worth of stock (technically called “units”) around current prices since August. CFO Gary Brauchle also was buying. In fact, insiders have done nothing but purchase shares all the way up since 2013. Continued buying on strength is a particularly bullish signal in insider analysis. Insider selling is less meaningful – and it’s not always a negative. But it’s worth pointing out there has been zero insider selling here in the past four years.

Tallgrass is an energy infrastructure company with two vast networks of pipelines called the Rockies Express Pipeline and the Pony Express spanning the country from Ohio to Colorado and Wyoming. They pipe energy from some of the most prolific oil and gas plays in the country, including the Marcellus, Utica Powder River, Bakken and Denver-Julesburg basins.

Tallgrass is a master limited partnership, which means there may be complications if you own it in tax-protected accounts. And MLPs definitely complicate matters at tax time. Technically, pipeline companies pay “distributions,” not dividends, because as MLPs, they are distributing profits to you without paying tax on them – one of the reasons yields are so high. As a result, investors who receive income from MLPs typically must deal with the additional K-1 form come tax time.

• Distribution yield: 5.8%

Pipeline companies pay such nice yields, it’s worth considering more than one for any energy sector dividend portfolio. Another one I’ve recently highlighted in my stock letter is Plains GP Holdings (PAGP, $20.88).

Investors soured on Plains GP this summer because it cut distributions due to problems in its supply and logistics business. But CEO Greg Armstrong, a director, and the general counsel were significant buyers in the weakness. They purchased $1.5 million worth of Plains GP units in August at around $21.50. Betting alongside insiders who challenge the market by buying weakness often is a winning tactic, and that should be the case here.

Plains GP may not get back to hiking distributions for a year or two. But it pays a nice distribution yield in the meantime, and you’re likely to see outperformance in its units as investors get more comfortable with the company again. That’s clearly what the insider buying suggests. The ace in the hole here: Plains operates pipelines and storage facilities that serve the Permian Basin – America's lowest-cost and most prolific shale basin, which should have years of growth ahead of it.

Brush has suggested TEP and PAGP in his stock newsletter, Brush Up on Stocks, as of this writing.

High-quality dividend stocks never go out of style for long-term investors, and there is no shortage of stocks with high yields and bright prospects for 2017, from telecommunications companies embracing the digital future to pharmaceutical companies riding the success of new drugs.

That's not to say that these stocks won’t fall if the market slumps this year. No stock is without risk. But between their near-term profit potential and sizable dividends, these 10 dividend-paying stocks are poised to deliver better-than-average total returns in the coming months.

(All prices and other data are as of January 9, 2017. Figures are based on the average of analysts’ forecasts for calendar 2017, as compiled by Zacks Investment Research, unless otherwise noted. Stocks are listed alphabetically.)

• Symbol: ABBV
• Share price: $63.79
• Dividend yield: 3.6%

The pharmaceutical sector is a great place to look for generous dividend payers and few stocks sport yields as high as AbbVie’s. The patent expired in December on AbbVie’s Humira, the top-selling anti-inflammatory drug on the market. Even so, investors are optimistic about the company’s new products, such as Imbruvica, a treatment for blood cancer. AbbVie’s shares returned 20%, including dividends, over the past 52 weeks, while the pharmaceutical sector overall was in the red.

Analysts expect robust profit growth for AbbVie in 2017, with earnings per share expected to rise 13% over estimated 2016 earnings on a sales gain of 10%, to $28 billion. That’s well ahead of analysts’ forecast for 9% earnings growth for the broader market, and 8% for the pharmaceutical industry. AbbVie has logged 44 straight years of dividend growth.

• Symbol: T
• Share price: $40.80
• Dividend yield: 4.7%

The telecommunications services sector is well-known for dividends, thanks in large part to AT&T. The company has paid uninterrupted dividends since 1984 and has raised its payout annually for more than three decades. AT&T’s yield is the highest in Standard & Poor’s 500-stock index, which has a yield of 2.1%

Although phone service remains AT&T’s core business, the company is moving aggressively into pay-TV and content production with acquisitions such as DirecTV and a pending deal to buy Time Warner (TWX)—an entertainment giant whose lineup includes CNN, HBO and the Warner Brothers movie studio. Analysts aren’t counting on the deal going through -- at least not without some modifications -- due to antitrust issues. But even without it, AT&T’s profits should still rise by about 5% in 2017, and the company’s strong free cash flow (cash profits, minus the capital expenditures needed to maintain the business) should support its next dividend hike.

• Symbol: CVX
• Share price: $115.84
• Dividend yield: 3.7%

The same forces that propelled Chevron’s stock to a gain of 36% in 2016 should only get stronger in the coming year. After a long slump, oil prices stabilized last year. And now that the OPEC oil cartel has agreed to cut production, prices are expected to rise even more. That's good news for Chevron, a component of the Dow Jones industrial average. The integrated oil company should see profits rise in its drilling and transportation operations, and despite the higher crude prices, in its refining business, too. Analysts forecast revenue to increase from $113 billion in 2016 to $153 billion in 2017. As a result, they expect the company's earnings per share to finally lift off, soaring 276% in 2017 over 2016 levels—far ahead of the tepid 2.5% rise expected for the industry overall.

• Symbol: F
• Share price: $12.63
• Dividend yield: 4.8%

U.S. auto sales set a record in 2016, but the prospect of leaner times ahead has weighed on shares of Ford. The stock slumped 8% in 2016, including dividends. Yet the market is treating Ford, with a price-earnings ratio of just 8, compared with 17 for the S&P 500, as if profits will fall off a cliff. That shouldn’t be the case. Although car sales are forecast to decline in 2017, they are still expected to remain close to record levels.

• Symbol: GM
• Share price: $36.01
• Dividend yield: 4.2%

As with Ford, the case for investing in General Motors comes down to generous dividends and a bargain-priced stock. Only about three-dozen stocks in the S&P 500 possess yields above 4%, GM being one of them. And GM distributed just 25% of its profits as dividends in the third quarter of 2016, compared with an average of just over 40% for S&P 500 companies, indicating ample room to cover its payout and hike it in the future. Analysts see earnings per share dipping from $6 in 2016 to $5.83 in 2017. But with a P/E ratio of 6, GM’s stock already reflects the expected earnings decline—and maybe then some.

• Symbol: IP
• Share price: $53.62
• Dividend yield: 3.3%

As one of the world’s largest suppliers of paper and packaging materials, International Paper may not sound like an exciting business. But it possesses some attractive features. The company dominates the market for containerboard, giving it exposure to rising demand for packaging used by online retailers. For example, the company supplies half of the shipping boxes used by Amazon.com. Analysts expect earnings per share to climb 23% in 2017 over estimated 2016 levels. The firm pays a healthy dividend, too, and it is income you should be able to count on, considering International Paper has paid uninterrupted dividends since 1993.

• Symbol: MRK
• Share price: $61.10
• Dividend yield: 3.0%

A health care stalwart and component of the Dow Jones industrial average, drug maker Merck hasn’t missed a quarterly dividend payment in more than three decades. A recent four-year streak of dividend increases looks likely to continue and Merck’s growth prospects look compelling. Years of acquisitions, along with research and development, have resulted in a slew of successful drugs now on the market. Cancer medicine Keytruda is an ongoing hit, for example, and Merck has more potential winners in the works, with 24 drugs in the latter stages of development. In the 12-month period that ended September 30, 2016, the company generated $9 billion in free cash flow. Analysts surveyed by Thomson Reuters see a 10% increase for Merck's stock in the next 12 months or so.

• Symbol: PFE
• Share price: $33.47
• Dividend yield: 3.6%

Like Merck, Pfizer is a Dow component and a relatively high-yielding stock. Investors worry that the company isn’t producing enough new products to overcome the loss of revenues from drugs that lose patent protection. But Pfizer has invested heavily in research and development, and it made some big acquisitions that should start to produce a new wave of products. Pfizer’s lineup of drugs in development looks promising, with 94 products in the works. Recent successes include breast cancer treatment Ibrance, blood thinner Eliquis and the pneumococcal pneumonia vaccine Prevnar 13.

The company has paid quarterly dividends consistently for decades and has a seven-year history of dividend growth. Earnings per share are expected to rise 8% in 2017, and the dividend looks well-covered. Pfizer paid $7.2 billion in dividends last year and another hike is expected in 2017. The firm's free cash flow is stable, ranging between $10.6billion and $19.3 billion since the last recession ended in 2009.

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• Symbol: VZ
• Share price: $52.68
• Dividend yield: 4.3%

Dow component Verizon has paid uninterrupted dividends since its name changed from Bell Atlantic in 2000. It can also claim 10 straight years of dividend growth. But the company has more to offer than an income stream.

Verizon is repositioning itself for a world in which mobile content is ubiquitous and digital ads are moneymakers. It purchased AOL for its digital-advertising technology in 2015 and currently has an agreement to buy Yahoo (YHOO). That deal may not go through, partly because of Yahoo’s recent disclosure of a massive data theft impacting more than 1 billion accounts. But Verizon is raking in cash from its mobile business, Fios TV service and other sources. Earnings per share should climb 3.6% in 2017. Throw in a 4.3% dividend yield and you could scoop up total returns close to 8% over the next year if the stock keeps pace with profit growth, as expected.

• Symbol: WFC
• Share price: $54.24
• Dividend yield: 2.8%

It's going to take some time for Wells Fargo to rebuild its reputation. The revelation that thousands of employees opened millions of accounts without customers' knowledge cost the CEO his job and continues to hurt business. But like all such scandals, this too, shall pass. Wells Fargo remains a "great bank," in the words of Warren Buffett. He should know. Berkshire Hathaway (BRK-B), the company he heads, is the bank’s largest stockholder. And Buffett hasn’t sold since the scandal broke. That should give investors confidence in Wells Fargo's prospects, but if that's not enough, 2017 is shaping up to be a good one for the entire financial sector. Interest rates are on the rise, which boosts banks' profitability. Financial deregulation -- a stated goal of the new administration -- could also pad the bank’s bottom line.

Pity investors who have held commodity stocks all the way through this long bull market. Although the major stock indexes have more than tripled since the last bear market bottomed, on March 9, 2009, stocks tied to oil, gas, precious metals and other commodities have sunk over the past 7½ years-plus, leaving shareholders with sometimes striking losses.

Of course, yesterday’s losers can sometimes prove to be the hot stocks of tomorrow. That may be especially true for energy stocks, particularly now that the OPEC oil cartel seems intent on cutting production, which could help boost crude prices. With that in mind, we took a closer look at the 10 stocks that performed the worst from the start of the bull market until mid September. We found a few diamonds in the rough, plenty of value traps and a few that could go either way.

Stocks were selected from the components of the Standard & Poor's 500 index by Morningstar and are listed in order of worst performance from March 9, 2009, through September 19, 2016. Prices, returns and related data are as of October 11. Price-earnings ratios are based on estimated year-ahead earnings. Returns are cumulative.

• Symbol: RIG
• Share price: $10.23
• Market capitalization: $3.7 billion
• Bull-market return: -77.3%
• Price-earnings ratio: 47
• Dividend yield: none
• The business: Transocean provides contract offshore-drilling services for oil and gas producers.
• What drove the stock: Transocean shares plunged following the explosion of its Deepwater Horizon rig, which resulted in the largest oil spill in U.S. history. The shares got a short-lived bounce in 2011, before the reality of the disaster’s cost hit Transocean’s bottom line, sending up a gusher of red ink. Things began to look more hopeful in 2013, when oil briefly rose above $100 a barrel. But crude prices subsequently hit the skids and, although they’ve recovered a bit, remain at roughly 50% below their 2013 peaks. The companies that rely on high-cost production methods, such as offshore drilling, were hit the hardest and, thus, were more likely to postpone or cancel projects. Transocean was forced to discontinue its dividend in 2015.
• Outlook: Sell. The offshore-drilling business is likely to face oversupply for some time, thanks to still-low crude prices and a glut of new rigs. If oil prices roar back, Transocean might, too. But with West Texas Crude still selling for less than $50 a barrel, the risks are too great.

• Symbol: FSLR
• Share price: $38.28
• Market capitalization: $3.9 billion
• Bull-market return: -68.2%
• Price-earnings ratio: 14
• Dividend yield: none
• The business: First Solar makes and markets solar panels.
• What drove the stock: Tax credits for installing solar panels sent First Solar stock soaring in 2007, its first full year as a publicly traded company. But increased competition from both U.S. and Chinese solar manufacturers started to pinch sales growth at the beginning of the decade, and falling prices left First Solar with big losses in 2011 and 2012. The company has been profitable since then, but investors remain wary of solar companies, partly because a key player, SunEdison (SUNEQ), filed for bankruptcy protection earlier this year.
• Outlook: Buy. Competition, particularly from low-cost manufacturers in China, remains a risk, but First Solar’s balance sheet is rock-solid and demand for solar energy should remain robust, giving the stock above-average appreciation potential in the long run.

• Symbol: DO
• Share price: $17.49
• Market capitalization: $2.4 billion
• Bull-market return: -59.5%
• Price-earnings ratio: 24
• Dividend yield: none
• The business: Offshore drilling for oil and gas.
• What drove the stock: Unlike Transocean, Diamond Offshore wasn’t at the center of an environmental disaster. It has simply been a victim of falling oil prices, which have tamped demand for Diamond’s rigs. Sales and profits have been sliding since 2009, and Diamond recently discontinued its dividend to conserve cash.

Outlook: Sell. Oil prices have to rise sharply for high-cost offshore drilling to come back, and OPEC is unlikely to cut production enough for that to happen. As with interest rates, oil prices are likely to stay “lower for longer.”

• Symbol: SWN
• Share price: $13.17
• Market capitalization: $6.3 billion
• Bull-market return: -51.0%
• Price-earnings ratio: 24
• Dividend yield: none
• The business: Southwestern explores for and produces natural gas.
• What drove the stock: The Fayetteville and Marcellus Shale formations, among the richest natural gas finds ever, were Southwestern Energy’s claim to fame when gas prices were high. It was also its undoing as gas prices plunged from $4.24 per million British thermal units at the end of 2013 to a low of $1.56 in March. Suffering with a $4.6 billion loss in 2015, the company sold new shares in July to pay off debt. That may have diluted the interests of existing shareholders, but the new capital helps the balance sheet.
• Outlook: Hold. Gas prices are firming and Southwestern is becoming more efficient. Though another dip in gas prices remains a risk, Value Line analyst Michael Napoli says the stock has healthy recovery potential.

• Symbol: CHK
• Share price: $6.28
• Market capitalization: $5.0 billion
• Bull-market return: -43.4%
• Price-earnings ratio: 15
• Dividend yield: none
• The business: Chesapeake explores for and produces oil and gas, both on and offshore
• What drove the stock: The collapse of oil and gas prices savaged both the balance sheet and the shares of Chesapeake Energy, which was well known under its former CEO, the late Aubrey McClendon, for paying top dollar for land and mineral rights. Under current CEO Doug Lawler, the company is cutting costs and selling assets to stem a tide of red ink, but the long-term leases it signed during McClendon’s tenure will take years to roll off the balance sheet.
• Outlook: Sell. Chesapeake’s stock has nearly quadrupled since February, as the company quelled rumors of impending bankruptcy. But the rebound does not warrant taking a chance on this still-troubled company.

• Symbol: NRG
• Share price: $11.13
• Market capitalization: $3.5 billion
• Bull-market return: -29.4%
• Price-earnings ratio: 27
• Dividend yield: 1.1%
• The business: NRG is the largest publicly traded independent wholesale producer in the U.S., generating electricity from oil, gas, solar, coal and nuclear power.
• What drove the stock: Big declines in in commodity prices, coupled with weak demand for electricity and overcapacity, forced NRG to sell and write down assets, particularly for its coal plants. As a result, NRG posted a $6.4 billion loss in 2015 and reported another, though smaller, loss in the second quarter of 2016. The company initiated a dividend in 2012, but early this year it slashed the payout from an annual rate of 58 cents per share to 12 cents.
• Outlook: Buy. NRG is taking advantage of SunEdison’s asset sales to buy solar and wind properties cheaply, and Value Line analyst Jeremy Butler thinks that will prove to be a smart move once demand for energy picks up over the next few years. Butler thinks NRG’s stock has above-average profit potential, though investors will need to be patient.

• Symbol: MOS
• Share price: $24.86Market capitalization: $8.7 billion
• Bull-market return: -27.6%
• Price-earnings ratio: 30
• Dividend yield: 4.5%
• The business: Mosaic produces phosphate and potash for fertilizers.
• What drove the stock: Slack demand for agricultural products has dogged Mosaic since the end of the Great Recession in 2009, depressing both sales and earnings. Value Line analyst Michael Napoli expects cost cutting and a slight pickup in demand to help reverse this slide in 2017. But, for the moment, the stock’s biggest selling point is its generous dividend yield.
• Outlook: Hold. Population growth will eventually drive up demand for fertilizer products. But fierce competition and the vagaries of agriculture leave Mosaic vulnerable to pricing pressure. That said, the stock has potential for patient investors with long time horizons.

• Symbol: SPLS
• Share price: $7.76
• Market capitalization: $5.0 billion
• Bull-market return: -26.9%
• Price-earnings ratio: 9
• Dividend yield: 6.2%
• The business: Staples is the nation’s number one retailer of office supplies.
• What drove the stock: Heated competition in the office-supply market has kept profits paper thin. Staples planned to address that by buying competitor Office Depot (ODP), but regulators nixed the planned merger in May, triggering a plunge in Staples’ stock. Staples is now closing stores and exploring “strategic alternatives” for its European operations. Cost cutting is expected to slash annual expenses by $300 million.
• Outlook: Buy. Competition in the office-supply market is likely to keep profit margins low, and that may weigh on near-term results, says Value Line analyst Oriatal Haiby. But she thinks Staples has superior long-term potential. Meanwhile, you can collect generous dividends while you wait for the recovery.

• Symbol: FCX
• Share price: $9.87
• Market capitalization: $13.1 billion
• Bull-market return: -22.7%
• Price-earnings ratio: 8
• Dividend yield: none
• The business: Freeport explores for and produces oil and gas, as well as gold, copper and other minerals.
• What drove the stock: Once known as Freeport-McMoRan Copper & Gold, the company changed its name after buying Plains Exploration and McMoRan Exploration for $20 billion, including assumed debt, in 2013. The timing couldn’t have been worse. Oil prices started falling the following year, exacerbating the impact of falling gold and copper prices. Freeport has been bleeding red ink for three years. Now it is divesting itself of many of its oil assets to repair the damage.
• Outlook: Hold. Freeport has valuable mining assets, and its oil and gas divestitures should keep the company afloat. But swings in commodity prices pose significant risks.

• Symbol: HES
• Share price: $52.57
• Market capitalization: $16.6 billion
• Bull-market return: -7.7%
• Price-earnings ratio: Not available (loss expected)
• Dividend yield: 1.9%
• The business: Hess engages in oil and gas exploration and production.
• What drove the stock: Plunging oil and gas prices aren’t the only problem at Hess, says Morningstar analyst Stephen Simko. Even before oil prices started sliding, Hess was going way over budget in its quest to find and develop new oil and gas resources in foreign markets such as Denmark, Guyana, Malaysia, and Norway, as well as in the Gulf of Mexico and the Bakken shale fields of North Dakota. But the costly explorations consistently yielded less than anticipated and spurred a shareholder revolt in 2013 that led to the ousting of nine members of the board and to sales of several assets.
• Outlook: Sell. A recovery in oil prices could help this laggard, as could a further shake-up in its management ranks. But the stock has jumped some 13% this year as oil prices have firmed. For now, opportunities in the energy sector look better elsewhere.

The oil glut has energy stocks plunging, but analysts say there are opportunities in the market's wreckage. Natural gas companies in particular could benefit from oil’s woes. And, though most oil companies will struggle if prices linger below $60 per barrel, the group has been pummeled so mercilessly over the past few months that some of the better-positioned oil stocks have become too cheap to pass up. “This is not a homogenous group,” says Mark Hanson, an energy sector strategist at Morningstar. “The companies with less debt, lower-cost production and production hedges in place are in the best position to ride this out.”

After several years of relative stability, oil prices started to slide last summer. The decline accelerated earlier in December after OPEC chose to do nothing to constrict supply. West Texas Intermediate crude, which sold for $108 a barrel in June, closed at just under $56 on December 16. With demand weakened by a combination of slower growth overseas and increased use of alternative energy sources, experts think oil prices could stay down for some time to come.

As oil prices have fallen, investors have bailed out of energy stocks. From July 24 through December 16, the S&P 500 Energy index sank 31%. The decline in energy stocks is predictable. Falling oil prices will lead to lower profits for nearly all energy companies, and many producers will lose money. But the carnage in the energy sector also creates opportunity for long-term investors willing to pick through the rubble for the likely survivors. Below, we identify eight such stocks. (All prices are as of December 16.)

Oil and gas producer Occidental Petroleum (OXY, current price $74.41; 52-week high, $101.38) has one of the lowest cost structures in the industry. That allows Oxy to profit even when oil prices dip to $60 a barrel, says Morningstar’s Hanson. To be sure, Oxy will struggle if oil lingers below that watermark, but the Houston-based company has a strong balance sheet and has proved to be an exceptional steward of its capital. That’s no accident. Oxy executives approach new exploration projects cautiously, stress-testing them to make sure they’d remain profitable even when oil prices plunge. Hansen thinks the shares are worth $99.

Cimarex Energy (XEC, $100.94; 52-week high, $150.71) has an even lower cost of production -- in the $50-per-barrel range -- which could allow it to continue drilling even when other companies have to mothball their wells. Cimarex also has little debt on its balance sheet. Hanson estimates that the stock is worth $113 today -- 12% more than its current share price.

Among domestic oil producers, Pioneer Natural Resources (PXD, $134.80; 52-week-high, $234.60) may be the most defensive stock, Hanson says. That's because the Irving, Texas, company has used futures contracts to lock in higher prices for 80% of its future output, and that will drastically mute the impact of falling prices on its profit and loss statement. Hanson thinks the stock is worth $187.

Companies that focus on natural gas production have also seen their share prices drop. Those declines are especially unwarranted, says Karl Chalabala, an analyst with Canadian investment bank Canaccord Genuity. For starters, gas producers have had to contend with lower prices for years, thanks to the fracking boom. And those prices are actually up substantially from their lows. Gas prices fell to as low as $2 per million British thermal units in 2012, but have since rebounded to $3.62 per million Btu’s.

The slide in oil prices could help boost natural gas even more, says Ronald Barone, an analyst with Maxim Group, a New York City investment banking firm. The reason: About 4% of the nation’s natural gas is produced as an ancillary benefit of pumping oil. If oil gets too cheap, fewer oil wells will be put into production, which will also reduce the supply of natural gas. Consulting firm Rystad Energy recently estimated that $150 billion in oil and gas projects may be shelved or delayed if oil prices remain depressed over the coming year.

At the same time, demand for natural gas is increasing at a brisk pace for a variety of reasons. More coal-based utility plants are being converted to gas to comply with environmental regulations. Next year, the U.S. will for the first time allow export of liquefied natural gas into the energy-starved European and Asian markets. Companies in energy-intensive industries, such as chemical manufacturing, are also bringing their manufacturing operations back to U.S. soil to take advantage of the nation’s cheap fuel costs, Barone says. That combination is likely to keep demand brisk for years to come.

With that backdrop, Barone’s favorite stock is EQT Corp. (EQT, $77.62, 52-week high, $111.47), which produces natural gas and natural gas liquids. The Pittsburgh company boasts one of the lowest cost structures in the industry and is capable of boosting production at a 20% annual pace for years to come. Barone thinks the shares will reach $134 within a year.

Rice Energy (RICE, $23.88; 52-week high, $34.34), formed in 2007, has developed some innovative drilling techniques, which are now being copied by other players that aim to get oil and gas from shale. The company's exposure to the oil market is negligible -- about 5% of production -- so the drop in its stock price “makes no sense,” says Canaccord’s Chalabala. And because the Canonsburg, Pa., company is young and small, it’s on a rapid growth trajectory. Chalabala expects Rice to more than double production next year, and thinks the stock will reach $42 in a year.

Range Resources (RRC, $58.22; 52-week high, $95.41), the first company to drill a vertical well in the Marcellus Shale basin a decade ago, has long-term leases on 1 million prime acres in western Pennsylvania. That allows Range, based in Fort Worth, Texas, to commit to long-term production contracts required by big utility companies. With production rising 20% to 25% a year, Range has both the experience and the reserves to be a major global player in natural gas, says Chalabala. His one-year price target: $76.

The slump in shares of Gulfport Energy (GPOR, $38.79; 52-week high, $75.75) is only partly related to the market’s malaise. The Oklahoma City producer replaced its chief executive early last year after the company made a number of missteps (for example, overestimating production and underestimating costs). His replacement slashed production estimates while spending money on a new well management system -- “all things you don’t want to hear.” But, Chalabala says, the moves were done for the right reasons, and now Gulfport is primed to meet Wall Street’s expectations. The company also now has the pipes in place to supply gas to the Midwest, where high demand for heating fuel means it commands premium prices. Chalabala thinks the stock will hit $55 within a year.

The safest way to play a dicey energy market is to go big. And no other energy company is bigger than ExxonMobil (XOM, $86.41; 52-week high $104.76). Not only does it have the financial muscle to weather a bad stretch, it is also well diversified. In fact, its refining and marketing arm (think gas stations) actually benefits from lower oil prices. Plus, the Irving behemoth pays a tidy dividend. At 3.2%, the stock’s yield is well above the market average. Morningstar analyst Allen Good says there’s little risk that Exxon will cut its dividend, which accounts for just 47% of profits. Good says the stock is worth $108.