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Sectors, Industries, and the Business Cycle — Energy
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The Energy Sector consists of companies whose businesses are focused on the following activities:

The construction or provision of oil rigs, drilling equipment and other energy related service and equipment, including seismic data collection.

Exploration, production, marketing, refining and/or transportation of oil and natural gas products, coal and other consumable fuels. In general, these companies generate revenue that’s tied to the price of crude oil, natural gas and other commodities.

The Energy sector comprises two major industries:

  • Energy Equipment & Services
  • Oil, Gas & Consumable Fuels

The energy sector is sensitive to the business cycle. Its industries are cyclical, meaning that they perform well when the economy is growing and suffer when the economy stagnates or shrinks.

Weather and seasons are another important factor. For example, there’s an increase in demand for gasoline in the summer and a decrease in demand during the winter, while natural gas sees a spike in demand during the colder months as people use it to heat their homes. The decrease in the demand is reflected in less storage and transportation which in turn leads to less drilling and exploration. Because of cyclical nature of the energy industries their earnings are also exposed to volatility.

The Energy sector is sometimes considered part of the Basic Materials sector. Tap below to watch our short video about oil & gas and chemicals.