[비즈한국] The stable box range of $70-80 per barrel of crude oil is now becoming a distant memory. International oil prices are hovering near the $100 mark, and at the April Federal Open Market Committee (FOMC) meeting, the Federal Reserve even went as far as changing the wording of its statement to explicitly mention that “recent increases in global energy prices are contributing to inflationary pressures.” Federal Reserve Chair Jerome Powell’s comment that “oil price trends over the next 30 to 60 days could completely change the policy narrative” also shook the markets. Every time we go to a gas station, we sigh; grocery prices are creeping up, and airline tickets have become more expensive. While this is a time when consumers feel their wallets thinning, the perspective shifts slightly for investors.
Capital is always flowing somewhere. If you can read where that flow is heading during a period of high oil prices, you can at least slow down the rate at which inflation erodes your assets.
First, we need to re-examine oil refining stocks. While this is the most intuitive choice, it is also fraught with the most pitfalls. Contrary to the common belief that “oil refineries benefit when oil prices rise,” the key variable for refinery performance is not the oil price itself, but refining margins—the profit remaining after buying crude oil, refining it into gasoline and diesel, and selling it. Interestingly, the oil and chemical sector is currently a kind of “empty house” in the market. With expectations having been low for some time, the prices of chemical products and basic materials have risen sharply, leading to earnings surprises in the first quarter.
Daol Investment & Securities pointed out that the potential for long-term shifts in Middle Eastern hegemony, sparked by the UAE's potential withdrawal from OPEC, is already being reflected in oil price scenarios, which could spread positive momentum throughout the sector. However, for Korean oil refineries like S-Oil010950, GS078930, and SK Innovation096770, quarterly earnings are quite volatile depending on global refining margins, exchange rates, and inventory valuation gains or losses. The advice is that if you are going to invest in refinery stocks, it is important to check the refining margin and inventory valuation items in quarterly earnings reports and not mistake them for simple “oil price-tracking stocks.”
Also, one must not overlook the fact that crude oil ETFs and ETNs can be both medicine and poison. These products are the easiest tools for betting directly on the direction of oil prices, but there is a catch: the cost of rolling over due to contango. These products do not actually hold crude oil; they roll over futures contracts. As the expiration date approaches, you must switch to the next month’s futures, and if the price of the next month’s contract is higher than the current month’s, losses accumulate by that margin. This means that even if oil prices move sideways or rise only slightly, the ETF price can gradually decline. While they are valid tools for short-term trading, the idea of “stashing them away for the long term to benefit from rising oil prices” is hard to recommend. If you really want long-term exposure, a sector ETF that holds energy company stocks is much more rational. This is because, even with the same increase in oil prices, you can accumulate profits through corporate earnings and dividends without the loss caused by contango.
Additionally, there is a new perspective on “stocks that benefit from rising nominal prices.” The view is that since all prices rise when oil prices climb, companies that can pass on these costs—or even more—to customers are the true beneficiaries. Power equipment companies within the data center value chain and the shipbuilding engine sector are frequently mentioned in this regard. With the demand for data centers exploding due to the AI boom, power equipment is in short supply, and due to tightened eco-friendly regulations, shipbuilding engines have become an area with significant pricing power. While the valuation burden is a clear risk, in a phase where nominal GDP inflates along with inflation, pricing power is essentially margin defense. In other words, it is a domain that can go beyond a simple inflation hedge and turn inflation into profit.
Let's also increase our inflation hedge assets. Rising oil prices lead directly to inflation pressure because transportation costs are baked into the price of all goods. It is in this same context that the April FOMC meeting explicitly stated in its statement that “a significant portion of the price increase is a result of reflecting the rise in energy prices.” Assets that have traditionally functioned well in this phase include gold, silver, and Treasury Inflation-Protected Securities (TIPS). Gold acted as a safe-haven asset both during the period when inflation concerns were mounting after the 2008 financial crisis and when oil prices soared due to the Russia-Ukraine war in 2022.
Domestic investors can easily access this via a KRX gold spot account or an ETF. However, keep in mind that gold tends to struggle during periods of a strong dollar, so it should be monitored alongside U.S. interest rate trends. REITs are also mentioned as candidates for inflation hedging, but do not forget that they may show weakness in a high-interest-rate environment due to the burden of borrowing costs. Allocating 5-10% of your assets to gold or inflation-linked assets is a conservative yet practical approach.
Lastly, the most certain way to manage your finances is to reduce spending. Squeezing out an extra 5% in investment returns is less effective than saving 100,000 won a month on gas and electricity, which is a guaranteed profit with no taxes or risks. The Opinet app, which provides information on budget gas stations, shows that there can be a difference of more than 100 won per liter even within the same neighborhood. It is worth checking credit cards that offer significant fuel tax refunds or gas discounts, as well as public transportation discount cards. If you take these savings and reinvest them into an ETF each month rather than just spending them, high oil prices can actually become an opportunity to grow your wealth.
Oil prices are a realm of response, not prediction. The volatility is high enough that even Chair Powell admits that oil price trends over the next 30 to 60 days could change Fed policy. What we can do is build a portfolio that can withstand any scenario that unfolds. We must not forget that in investing, the most expensive phrase is “this time is different,” and the most reassuring is “I have diversified.”