The Best Energy ETFs to Buy

More than a century after American magnate John D. Rockefeller built a petroleum empire through Standard Oil – at its peak, the company controlled roughly 91% of U.S. oil production – its legacy still looms large in today's market.

Some of the biggest players in the energy sector today can trace their corporate roots directly to the 34 operating companies created by Standard Oil's historic breakup. The list features Exxon Mobil (XOM), Chevron (CVX), BP (BP) and Marathon Petroleum (MPC), among others.

Today, there's no reason for prospective energy investors to go piecemeal trying to put Standard Oil back together. There are many good reasons to skip the stock-picking altogether and opt for an energy ETF instead.

Why buy energy ETFs?

Energy ETFs are often viewed through a one-dimensional lens – primarily as a way to speculate on commodity prices. That makes sense at first glance, given the basic mechanics of how an integrated oil and gas company earns revenue.

Such firms extract crude oil or natural gas, process and refine it, and then sell it in various forms. When energy prices rise, it means better margins on those products, stronger earnings and, ultimately, higher stock prices. That dynamic is what draws traders and short-term investors looking to ride a price rally.

But that's just one of many ways energy ETFs can fit into your portfolio.

Another key use case is inflation hedging. During the high-inflation, rising-rate environment of 2022, when most funds struggled, energy ETFs stood out as one of the few that posted gains. That's because inflation tends to lift the input costs across the economy, including oil and gas.

Energy producers who sell those inputs can benefit from higher prices and pricing power, making them a rare winner when everything else is getting squeezed.

Finally, many of the largest energy companies have gotten incredibly lean and efficient in recent years. They've paid down debt, boosted margins and focused on capital discipline, which has led to record levels of free cash flow – essentially the money left over after paying for operations and maintenance.

With all that excess cash, they've ramped up shareholder returns through stock buybacks and, more notably, paying dividends. Energy giants routinely offer dividend yields that far surpass the broader market, making energy ETFs an appealing option for income-focused investors.

How we chose the best energy ETFs to buy

To narrow the field, we focused only on broad energy sector ETFs, funds that provide diversified exposure across the entire oil and gas value chain.

The energy industry is typically divided into three core segments: upstream (exploration and production), midstream (transportation and storage, including pipelines) and downstream (refining and distribution of end products like gasoline).

While there are plenty of niche ETFs targeting just one part of this chain – such as master limited partnerships (MLPs) or the companies drilling for oil and gas – we excluded those in favor of funds with broad coverage across two or more segments.

We also excluded leveraged and inverse energy ETFs, which are generally geared toward short-term trading, not long-term investing. These products reset daily, and compounding effects over time can result in returns that deviate significantly from the underlying benchmark.

Additionally, we left out commodity ETFs that trade oil, natural gas or refined fuel futures contracts. These tend to carry complex tax treatment – often issuing Schedule K-1 forms at tax time – and come with higher expense ratios and elevated volatility.

Lastly, while clean energy is undoubtedly a vital part of the global energy transition, it occupies a niche of its own. So don't expect to see any solar, wind or nuclear-focused ETFs on the list.

This roundup is specifically geared toward conventional energy ETFs that provide diversified access to the oil and gas industry in all its stages. From there, we applied our usual three-part ETF selection framework:

Fees: Investors should avoid paying more than 50 basis points (0.5%) annually for a sector ETF in 2025, especially when many solid options charge well under that threshold.

Liquidity: A good ETF should be easy to trade, with a tight 30-day median bid-ask spread that minimizes hidden transaction costs.

Reputability: We prioritized ETFs from established issuers with strong track records and sufficient assets under management (AUM) to reduce the risk of fund closure due to lack of investor interest.

With that in mind, here are five of the best energy ETFs to buy.

Data is as of December 12.