A green push towards heavier use of renewable energy sources isn’t holding back prices when it comes to oil and gas, helping the case for gains in ETFs such as the Invesco Dynamic Energy Exploration & Production ETF (PXE).
Based on Morningstar performance figures, the fund is up close to 100% for the year. It’s a remarkable comeback given that just the previous year, the fund was down close to 40% thanks to oil prices hitting below $0 before recovering swiftly.
Since then, rising energy prices have begun hitting the consumer market. As inflation rears its ugly head, more consumers are feeling the pain at the pump and in other areas that require fossil fuel energy sources.
“Americans are spending a dollar more for a gallon of gasoline than they were a year ago. Natural gas prices have shot up more than 150 percent over the same time, threatening to raise prices of food, chemicals, plastic goods and heat this winter,” a New York Times article explained.
It’s not just in the United States where consumer prices are rising. The global demand for oil, natural gas, and coal is rising while inflation is doing the same.
“The energy system is suddenly in crisis around the world as the cost of oil, natural gas and coal has climbed rapidly in recent months,” the article added further. “In China, Britain and elsewhere, fuel shortages and panic buying have led to blackouts and long lines at filling stations.”
A Dynamic Oil/Gas Inflation Hedge
PXE offers the ideal inflation hedge, particularly if investors want to protect their fixed income sources. Rising interest rates could tamp down gains for bonds as the Federal Reserve looks to taper off its economic stimulus measures.
PXE seeks to track the investment results of the Dynamic Energy Exploration & Production IntellidexSM Index. The fund invests at least 90% of its total assets in the securities that comprise the underlying index.
The index is composed of common stocks of U.S. companies involved in the exploration and production of natural resources used to produce energy. These companies are engaged principally in the exploration, extraction, and production of crude oil and natural gas from land-based or offshore wells.
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