In researching some additional stocks I want to acquire, I've noticed many energy stocks trade at lower prices and exhibit a large amount of volatility. Why is that despite the fact energy is a basic need like food and clothing?

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    Energy stocks have been beaten down due to the fall in commodity prices in the futers market.
    – user9722
    Commented Dec 16, 2015 at 21:32

2 Answers 2


Large-scale price range of a stock isn't directly meaningful; that reflects how many shares exist, not just how desirable they are. A stock split, for example, doubles the number of shares everyone holds while cutting the value of each share in half; that's meaningless except that it makes the shares a bit easier to trade in.

Change in price is more interesting. In the case of energy companies, that often reflects major changes in energy supply, distribution, use, or how well positioned people feel the company is for the next change in these. Fracking's surge and the questions raised against it, whether a major pipeline will or won't be built, international energy price trends, breakthroughs in renewables... if it might affect energy price, it might affect the company's strength, both absolute and relative to others.

In other words, the same kinds of things that affect any stock.

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    Check out commodities such as precious metals, they have large swings as well based on all sorts of global factors just like energy. The volatility of a stock is almost always tied to the questions and unknowns because they make it harder to calculate a fair value. Certain industries have many global and/or unpredictable factors, e.g. a US precious metals stock will swoon when there is a downturn in unpredictable China because they consume a lot of precious metals. A US utility has less volatility because it has a very consistent business with high barrier of entry and little disruption.
    – Alex Kuhl
    Commented Dec 17, 2015 at 4:18

I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares.

As to why energy stocks are volatile, I can think of several reasons.

One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc.

Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days.

Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant.

Note numbers two and three also apply to food, which is why food production is also very volatile.

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