It’s no secret that oil prices and inflation are connected, but trying to decipher which is the driver is like trying to end the age-old debate about the chicken or the egg: Does inflation increase because oil prices have risen? Or do oil prices rise when inflation starts to uptick?
Regardless, the two go hand-in-hand and oil prices have skyrocketed over the last few months as inflation rates have continued to rise to nearly 8%, the highest rate in 40 years. At the same time, oil has risen from just over $66USD a barrel at the beginning of December to over $94, as of Tuesday, 15 February 2022. The big winner in all of this: oil and gas companies.
The MVIS US Listed Oil Services 25 Index (Ticker: MVOIH), has seen a major uptick over the last few months as inflation has worsened. MVOIH, which tracks the performance of the largest and most liquid US-listed companies in the oil services industry, has been up over 29% Year-to-date, and more than 38% since the start of December, as of 14 February 2022. Compared to oil companies’ stock prices, oil service companies’ stock prices have even higher leverage on the price of oil. If inflation continues to rise, oil and gas services companies will only continue to reap the benefits.
MVIS US Listed Oil Services 25 Index
Source: MV Index Solutions. All values are rebased to 1000. Data as of 15 February 2022.
About the Author:
Steven Braid is a Data and Marketing Analyst at MV Index Solutions. He is responsible for supporting the data, marketing, research, and product services. Prior to working for MVIS, Steven worked as an equity research analyst for Dane Capital Management, a special situations hedge fund, where he focused on SPACs and other forms of special situation transactions. Prior to his time in Finance, he worked as a professional journalist, publishing for the New York Times, USA Today, and other national periodicals. Steven has a M.S. in Data Analytics & Applied Research from the Baruch College Zicklin School of Business, and a BA in International Political Economy from the University of Michigan.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.