Motley Fool Hidden Gems Investing - Oil Glut, Wind Freeze, and Energy Policy in the Year Ahead

Episode Date: December 30, 2025

Emily Flippen is joined by Jason Hall and Keith Speights to unpack the biggest energy headlines of the past week and what they could mean for energy investors heading into 2026. How geopolitics and sanctions may impact oil pricing in the year ahead Whether or not the “energy transition” is still moving forward despite policy headwinds How energy investors should be feeling heading into the New Year after a lackluster 2025 Companies discussed: FANG, EOG, XOM, CVX, PCCYF, SNPMF, ENB, ET, EPD, FLSR, SEDG, CWEN, BIP, BEP, NUE, CAT, D, EVRG, META, PSX Host: Emily Flippen, Jason Hall, Keith SpeightsProducer: Anand ChokkaveluEngineer: Bart Shannon Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. Learn more about your ad choices. Visit  ⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Emily Flippen. Oil remains cheap, but politics are increasingly loud. We're breaking down the energy-related headlines investors may have missed and what 2026 can look like from here today on Motley Fool Money. Today is Tuesday, December 30th. Welcome to Motley Fool Money. I'm your host, Emily Flippen, and today I'm joined by Fool analyst Jason Hall and key spites to dig into the latest in energy headlines, including the oversupply of oil, a pause in offshore wind energy projects, and how energy investors should be feeling heading into the new year. Now, over the past year, oil prices have continued a pretty substantial march down. There's lots of, of course, different ways to measure oil prices. But in general,

we can say prices are broadly down about 20% today than they were at this point last year, largely driven by concerns about oversupply. Obviously, production here in the United States, but also OPEC, adding some supply points over the course of the past year. Jason, I know this is your industry, and it seems like everyone is afraid of the oversupply of oil. I mean, it might be part of the reason why energy stocks have broadly underperformed the market in 2025, given the volatile nature of oil prices. How do you think investors should be thinking about the energy sector as an investment? I think it's a starting point.

I follow the banking industry really close, too, and the banking executive tells a story about one time being asked by his child, Dad, what's a banking crisis? And he says, oh, it's something that happens about once a decade. And in the oil industry, it's the same thing. What's an oil crisis? It's something that happens about, well, once every five years, actually. It tends to happen more often. Oil prices are actually down more than half from the peak just a few years ago.

And this is a common refrain in the industry. In the 15 years that I've followed it, there are always geopolitical factors that come into play. but it seems like the velocity of the global oil and even the gas prices has increased because the supply dynamics have really, really shifted. U.S. oil production peaked back in 1970. We passed that peak again in 2014. But again, think about that. From 1970 to 2014, before we got back to those prior levels,

so there were 40 years where oil production declined in the U.S. before bottoming in 2009. that we saw the shale revolution starts to kick in. And it was 2014 when we finally returned back to those 1970 levels. And then we've hit a new record every single year. A lot of people don't realize there's the political narrative that depending on where your news sources are, make it seem like the U.S., we're not producing oil and it's impossible. But the reality is the U.S. is the largest oil producer in the world. We just consume a lot more that we produce. And there's a lot of the mechanics of the way oil is refined because we bring so much oil in that means we rely on those imports, especially East Coast refiners

rely on those imports because that's what their refineries are set up to produce. All oil isn't the same. Like the light sweet crude coming out of Texas, all those Gulf Coast refineries refine that. But if you're an East Coast refiner, you're probably taking sour crude from the Middle East Venezuela, foreshadowing. Those facilities are built to be able to produce. Now, here's the thing. As scary as all that sounds with these geopolitical factors and the reality of the pressures of OPEC and things that are going on with Russia affecting the market, most U.S. producers, they can make money at $50 oil. We're at about $60 today, so the industry's fine. We could even dropped to 40, and the vast majority of those producers, they could cover their production

costs and even fund CapEx, which is really important for shale, because of the decline curves that we'll talk about here. Those decline curves are actually really interesting. Those dynamics with those wells, they drop a lot of production off after the first year. It means that these U.S. producers, if we do have oversupply, they actually have a good ability to bring their expenses down by just letting the wells decline. Some interesting dynamics that are favorable in ways for the U.S. producers. But again, what it gets back to is the fact that we just need oil from other parts of the world to feed those refineries. Now, there's your Oil Markets 101. That's the background of what's going on.

How do we think about it as investors, as a starting point? Companies like Diamondback Energy, ticker FANG, EOG Resources, that's the ticker EOG. These are independent oil producers. These are the companies a lot of people get interested in when oil prices are down that are looking for an opportunity. They're just super leveraged to oil prices, because they make their money producing and selling oil. Now, here's the thing. Let's talk about the dynamics again of the pricing.

Early 2022, oil prices were above $120 a barrel. They're down 55% since then. EOG and Diamondback earnings are down about 37% and 41% since then. They're pretty good operators. Earnings are down, but they're not down as much as oil prices are, so that's positive. Now, their stock prices are down about 29%, so the market recognizes, hey, these are pretty good businesses. Now, they trade for 11X trailing earnings. To say all that, it's like, oh, wow!

Value investor in me is getting really, really interested in here. Guys, have you ever heard about a value trap? This is what got sprung on investors about a decade ago. They're cheap for a reason. Back in 2015, OPEC and Russia launched this massive global trade war and flooded the world with oil. Guess what? It happened at the same time shale was ramping up. I talked about those record levels returning to 1970 levels. That happened right when our global competitors flooded the market with oil. Oil fell from $115 a barrel in the summer of 2014 to less

than $30 a year and a half later. Didn't get back above $60 until late 2017. For three years, three years, oil averaged less than $50 a barrel. That's another $10 below today's prices. The point is that today's prices look really, really cheap and the businesses are built to be able to function perfectly well in them. But again, the value trap that gets sprung is the global supply fundamentals don't look great. OPEC is suggesting the threat of a lower for longer narrative that could play out. Again, I think the prices look good, but they could get a lot worse. Besides embracing volatility, there's not a lot of traits of rule breaker stocks that apply to these sorts of businesses. You have to be very disciplined. You need to know the markets,

and you need to be willing to hold through some ugly to get to the pretty on the other side of it. Even like ExxonMobil, these big, giant companies, they can be good dividend players, dividend growers, there's no top dogs, there's no first movers, there's no brand leaders. You just have to be disciplined on cost, and you have to ride out those commodity prices. I feel slightly less bad about dragging my feet as it applies to oil investments now, after hearing that, Jason, although it does sound like an interesting industry. Keith, as we wrap up this segment here, I mean, no conversation about oil is complete without discussing what we're seeing with Venezuela right now, given that the situation

has escalated so quickly. Just this past week, Reuters is reporting that oil loading has slowed down with tankers in the region after some geopolitical conflict with the United States. Now, I understand that chances are this won't cause a massive, immediate disruption. Oil production still exists. It just depends on where it's going. But all of these things do drive oil prices to Jason's earlier point, and they're critical inputs for businesses across the world. So, anything investors should be making of the headlines today as it applies to Venezuela or second-order impacts? Yeah, Emily, I think first, it's important to keep in mind that only a small percentage of U.S. oil

is imported from Venezuela. It's around three or four percent. Now, there are certain regions in the country that have higher percentages. Jason mentioned the East Coast as one example. But overall, we're talking about three, four percent. My hunch, though, is that an escalated conflict in Venezuela could still temporarily impact oil prices in the U.S., but not because of a significant change in the actual supply-demand picture, but more than anything, just the psychological impact of it. But that said, there are some stocks that could be negatively impacted by an escalation in Venezuela. Chevron is a great example. Chevron could really feel the pain from an escalated conflict because it's the only major foreign oil company still operating

in Venezuela. So that's a stock that could take a hit, although Chevron is such a huge player, I don't think it's going to just cause the stock to tank. Other countries such as China and India depend much more heavily on Venezuelan oil than the U.S. does. So with the potential for further escalation of the conflict in Venezuela, I'd be especially leery of investing some of the Chinese stocks, especially some of the oil stocks that trade over-the-counter in the U.S., like PetroChina, ticker there is an over-the-counter ticker of PCCYF, and Sinopec, ticker there is an over-the-counter SNPMF. Investors seeking opportunities to potentially profit from a potential escalation of the conflict in Venezuela have at least two viable alternatives

in my view. One is to invest in the stocks of gold miners, such as Numont. There's NEM. Gold prices usually rise when geopolitical uncertainty increases. And so you could see, even though they've had a great year in 2025, I think you could see some of the gold stocks actually go even higher in 2026 as a result of all of this. Another option for investors is to take a look at North American midstream energy leaders. A good example would be Enbridge, ticker is ENB, or Enterprise Products Partners, ticker there's EPD, or maybe Energy Transfer, ticker there's ET. The U.S. now ranks as the second largest oil exporter in the world behind Saudi Arabia, even though we still do import some oil because of some of the dynamics

Jason mentioned with the refineries. Canada ranks as the fourth largest oil exporter. So, an expanded conflict in Venezuela could drive higher demand for North American oil. And that is going to flow through thousands of miles of pipelines operated by some of these top midstream companies. Lots of good opportunities for investors who are looking to play the energy, but want to do so wisely, avoiding some of the conflict there with Venezuela. Up next, we're diving into renewables and how policy risk has colored performance there. Stick with us. New from Nespresso, blend wellness into your coffee routine with the Coffee Plus range, infused with functional benefits.

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While energy eyes have been focused on the oversupply of oil, offshore wind projects did take a bit of a blow this week. The Trump administration paused five major wind energy projects, which is causing fear and some confusion amongst developers and utilities that were tied to those wind projects. But taking a step back, this is really just fitting the broader narrative that I think we've seen over the course of the past year, which is that renewable energy and the transition towards it has taken a bit of a step back. Jason, I want to start with you. Given the policy risks that exist for renewable energy stocks, do you think that these stocks are still worth investing in? Is that transition to green energy happening still? And if so,

is it a feasible way to play despite the headwinds? As U.S.-centric investors, we have a pretty myopic view of renewables, and it's a big global opportunity. Despite the things that are happening in the U.S., there's still a massive, massive opportunity. Renewables were the largest source of new energy brought online in 2025, and they were the largest source of New Energy Brought Online in 2024. It continues apace. Now, the catch as American and U.S.-based investors is, where's the opportunity? How do you leverage it and make money and avoid losses? A couple of things. The first thing is, there's the misnomer about oil supply I talked about before. I think there's a misunderstanding about the technical realities of investing

in renewable stocks, too. We think of these as high-tech, innovative companies, really attractive to rule-breaker style of investing. Guys, these are still commodity businesses. They still live and die on selling electrons, right? So it's all about the cost per unit is still so critically important. Moats are very rare. For every first solar that's had a great technology, like their thin film panels that just are incredibly reliable and utility scale developers love them, there's a dozen commodity panel makers that are just driving down prices.

So it's that race to the bottom. This has carried over to like Enphase and SolarEdge, which for every moat that they might have in terms of their ecosystem for residential users. Again, it's the cost per watt continues to go down. We saw the Trump administration, working with Congress, pulled all of the federal incentives for renewables that expire. In a couple of days, actually, they're going to expire. But there's other factors that have been at play for a long time. The bigger factor, if we go back to interest rates skyrocketing back in 2023, that killed residential solar because it's the funding mechanisms that matter more than anything.

As we get on to the other side of what's going on there, we saw the bottom in 2024, and this is going to be a really good year for residential solar, actually. And it was a good year before the tax incentives were canceled. That's kind of speeding it up. But why is that happening? Interest rates have come down. That's a good thing. Also, energy costs have skyrocketed.

Since 2019, utility costs are up like 40% in the U.S. Since 2013, transmission costs have doubled. So, all of those things are coming into play. I think the dynamics put companies like Enphase, ticker ENPH, SolarEdge, SEDH, in relatively good positions from a financial perspective. Now, there's a little bit more I think is important to think about, too. The renewable energy is not just bigger than the U.S., but it's also bigger than residential solar. There's the big companies like Clearway Energy, ticker CWEN, Brookfield Renewable, ticker BEP,

Brookfield Infrastructure, BIP, these are the big companies that develop, invest in, and operate the utility scale, these big, big projects. When costs are lower, that's really, really good for them, because they're the buyers, right? So, they can take advantage of those opportunities during the downturns. And clearly, Wayne and Brookfield both have a knack of being savvy buyers in tough times. They have capital when others need a lifeline. And we could see them take advantage of those opportunities in the months to come. That's one of the benefits of being a well-capitalized player in an industry that

isn't going anywhere. When the industry is down, typically the leaders just further their advances. But Keith, renewable energy projects were pitched initially as one of the big inputs to drive energy growth to meet soaring demand from AI data centers. But it seems like that's changing. I mean, just this month, the PALF passed a permitting reform bill aimed at approving more big infrastructure, though it looks to speed up energy infrastructure broadly, as opposed to just clean energy. Are there any businesses that you think are net beneficiaries from this bill? Should it pass in the Senate? Big emphasis on should. We don't know if it's going to. Right. Yeah. I do like some of the picks and shovel stocks that could benefit from greater spending on energy

infrastructure. For example, Nucor could be a big winner as the demand for steel increases. Another likely beneficiary, in my view, is Caterpillar, ticker there, C-A-T. Nucor's ticker, by the way, is N-U-E. Any major infrastructure buildout is going to probably require heavy machinery, construction equipment. That would likely translate to higher revenue for Caterpillar. Big utility companies would also be helped by a significant reduction in red tape related to capital projects. Dominion Energy, ticker there's D, and Evergy, ticker there's EVRG, are two names I like in this space. Dominion is headquartered in Virginia, close to you, Emily, which is basically the data center capital of the world. There's so many data centers being built in

Northern Virginia, especially. Evergy is not as well known, but it provides power in Kansas and Missouri. And both of those states offer tax incentives for data centers. As a result, companies such as Meta Platforms, ticker there, by the way, is M-E-T-A, they're building data centers in the region. So Evergy is benefiting from that. I hadn't even heard about Evergy before you mentioned that. So certainly one to dig into more. But coming up next, we're going to put you on the spot again, Keith and Jason, to get an even more stock ideas from you both by reflecting on the past sector performance and whether or not energy stocks are still poised for a comeback in 2026 we'll be back soon in toronto every arrival is a statement and nothing says it better than

this cadillac optic was the number one selling luxury ev in canada for 2025 find your rhythm across a seamless 33 inch display and an immersive 19 speaker akg surround audio system this city demands agility and optic delivers with precision to make every drive extraordinary let's take the Cadillac. Find out more at cadillaccanada.ca. Luxury sales claim based on S&P Global Mobility Canadian New Vehicle total registrations for calendar year 2025 for the Cadillac definition of luxury. Welcome back to Motley Fool Money. As we discussed, 2025 energy performance was, you know, characterized by an oversupply of oil, reinvestment in things like LNG, and the underperformance of renewable and green energy stocks, despite the fact that,

as we learned today, there's still heavy investment globally in these things. Keith, What changes, if any, are you going to make to your energy exposure in your portfolio for 2026? Emily, I expect to increase my positions in pipeline operators, midstream companies such as Energy Transfer and Enterprise Products Partners. I've mentioned both of those companies already. As I mentioned earlier, these companies could benefit from a potential escalation of the conflict in Venezuela. Whether or not that happens, we don't know. But they could also be helped if the Senate passes the SPEED Act, which we discussed, which would reform permitting for infrastructure projects. More importantly, though, these pipeline companies profit from the

continued surge in data center construction and the shift from coal-fueled power plants to natural gas. I could also maybe consider adding more shares of renewable energy stocks. I already own Brookfield Renewable, which is a stock Jason mentioned, and Clearway Energy I own. I would especially look at maybe buying more of those stocks if valuations become even more attractive. Now, admittedly, the dynamics for renewable energy in the U.S. aren't as encouraging now as they were a few years ago, and Jason talked about that. But I still believe that all of the above is the best strategy for U.S. energy and for any country's energy. So, that means more rather than less renewable energy over the long term. Well, for Enphase's sake, I hope that is the case. And

Jason, when you look at it, how do you think an investor should manage their energy investments, given the lack of predictability we have in the year ahead, both in terms of, obviously, supply and demand, but also, of course, geopolitics? I think it starts and ends with companies that have really good cost controls and cost advantages, because this is a commodity industry at the bottom line. And that's the one reason why I think I've been early on Enphase. That means I've been wrong so far. Hey, I'm right there with you. The bottom line is that it's a company that has continued to generate cash flow, even through a brutal, brutal period. It's a U.S.-based manufacturer and has international

manufacturing with its contract relationships. Those are advantageous with the current administration. That all-of-the-above policy that Keith talked about, I think it's going to continue to play out. I think starting there matters a lot. And one of the companies that I like in that regard on the oil and gas side is Phillips 66, ticker PSX. It doesn't produce oil, but it refines it. It has real strong cost advantages as a refiner. It's very big in petrochemical manufacturing. It has a lot of those midstream and storage assets that Keith talked about. It's a great dividend growth investment. And investors got a little bit of an opportunity to buy it at a pretty good price here recently when they announced their

CapEx plans for next year, which pushed the stock price down. It's a very well-run business. I think it's largely immune from some of those long-term factors that affect these stocks in the short-term. It's built to be a big winner. Awesome! Well, we learned a lot about oil, energy, renewables today, and more than enough interesting stocks for our investors and listeners to dig their teeth into. Keith and Jason, thank you both so much for joining today! As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for Oregon, so don't buy or sell stocks based solely on what you hear. All personal finance

content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provide for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Jason Hall, Keith Spites, and the entire Motley Fool Money team, I'm Emily Flippen. We'll see you tomorrow.