Terms that come up often in energy industry analysis, from oil and gas refiners and energy companies to power equipment, nuclear power and renewable energy. 26 terms in total.
Upstream is finding and extracting oil and gas; downstream is refining it into gasoline and other products and selling them. Upstream profit rises with oil prices, while downstream can be pressured by higher raw material costs.
e.g. The middle stage, transport and storage such as pipelines, is called midstream.
Refiners buy crude oil, turn it into gasoline, diesel and other products, and earn the gap between product prices and crude prices (the refining margin). That gap, more than the oil price itself, drives refiners' operating profit.
An accounting gain or loss from changes in the value of crude and product inventory a refiner bought earlier, caused by oil price moves. Rising prices create gains and falling prices create losses, so it should be separated from core operating performance.
Crude oil trapped in tight rock layers (shale) and extracted with horizontal drilling and hydraulic fracturing, making up a large part of U.S. crude output. Output can be raised or cut fairly quickly as prices move, which is seen as a factor capping global oil prices.
The number of oil and gas drilling rigs actually operating; the weekly count published by U.S. oilfield services company Baker Hughes is well known. More drilling signals higher production a few months later and shows demand for energy equipment and service companies.
Natural gas is a fuel for power generation and heating; LNG is natural gas chilled to about minus 160 degrees Celsius to shrink its volume. It can be shipped to faraway countries that pipelines do not reach, so liquefaction facilities and export contracts drive growth for related companies.
Data centers that run AI computing use enormous amounts of electricity. As more are built, investment in power plants, grids and power equipment is also needed, linking the AI boom to power-related stocks.
Transmission sends electricity from power plants over long distances at high voltage; distribution steps it down to lower voltage and delivers it to homes and factories. Grid investment is growing because of aging equipment replacement and connecting new power sources.
A device that raises or lowers electrical voltage, essential throughout the power grid. Large transformers are built to order and take a long time to make, so when demand surges, delivery times lengthen and prices tend to rise.
A long, strong run of demand for power equipment such as transformers, circuit breakers and cables, driven by replacing aging equipment, data centers and connecting renewable energy. As backlogs build and selling prices rise, related companies' profits can grow sharply.
A machine that burns natural gas to create powerful rotation that drives a generator. It can start and stop quickly, so it is used to cover demand spikes and renewable variability, and few companies make them, so supply tends to be tight.
Generating electricity by boiling water with heat from uranium fission. It produces steady power around the clock regardless of weather with almost no carbon emissions, so it is getting renewed attention as a way to meet rising power demand and cut carbon together.
A nuclear reactor designed smaller than traditional large plants, with major components built as modules in a factory and assembled on site. Hopes are high that it cuts construction time and upfront cost, but there are few commercial examples so far, so licensing and real costs need to be checked.
EPC means one company takes on Engineering, Procurement and Construction together. A nuclear export deal is very large, so not only the prime contractor but also main equipment, construction and parts companies can benefit.
The mineral used as nuclear fuel. Mines take a long time to develop, so supply is hard to increase quickly, and as plans for new reactors grow, uranium prices and earnings expectations for uranium miners tend to move together.
Energy made from replenishable resources such as sunlight and wind. Fuel costs are almost zero, but output varies with the weather, and related stocks react sharply to policy changes such as government subsidies and tax incentives.
A cell is a small plate that turns light into electricity; several cells combined into a panel make a module. Oversupply can quickly push prices down, so trade rules and incentives for local production greatly affect company profitability.
Generating electricity with wind turbines built at sea. Sea winds are strong and steady, so output is high, but installation costs and interest burden are heavy, and projects can be delayed or canceled when interest rates or costs rise.
An economic system that uses hydrogen as a fuel for power generation, transport and industry. Green hydrogen, made by splitting water with electricity, has almost no carbon but is still costly to produce, so there can be a big gap between expectations and actual revenue for related companies.
A tradable right to emit a set amount of greenhouse gas. When allowance prices rise, costs rise for heavy emitters, while companies with carbon-cutting technology and equipment find opportunity.
A long-term contract in which a power producer and an electricity buyer agree to trade power at a set price. The producer secures stable income, and buyers such as big tech companies secure supply and help meet carbon reduction goals.
e.g. A company running data centers signs a long-term PPA with a nuclear or solar plant.
All costs of building and operating a power plant divided by the electricity it produces over its lifetime. It is used to compare the economics of different generation methods, and as the value falls, that power source tends to spread faster.
Electric and gas companies are often regional monopolies, so a government or regulator approves their rates. Earnings are stable because a set return is allowed on invested equipment, but whether rate increases get approved determines profit.
Base load is the minimum power needed steadily all day; peak load is the power needed when demand is highest, such as a hot afternoon. Steady sources like nuclear and coal mainly cover base load, while quick-start sources like gas plants cover peak load.
The long-term shift from an energy system centered on coal and oil to one centered on renewables, nuclear and electrification. It changes policy and investment direction greatly, which is why stocks of traditional energy companies and new energy companies often move in different directions.
An ESS stores surplus electricity in batteries and the like and releases it when needed. It smooths out uneven output from solar and wind and fills peak-hour demand, so demand grows as renewables spread.