The People of America's Oil and Natural Gas Indusry

The Soundness of Investments in Oil and Natural Gas

Mark Green

Mark Green
Posted April 28, 2015

New analysis of the performance of oil and natural gas stocks in public pension funds shows the importance of a healthy energy sector to the futures of millions of Americans – as well as the misguided nature of efforts to force institutions to end investments in oil and natural gas.

The first strengthens our country’s economy and makes more secure the future for a broad swath of people – starting with retired teachers, police officers and firefighters, among others – while the second most likely would do harm to a lot of regular Americans.

Key findings in the Sonecon LLC study:

  • On average, $1 invested in oil and natural gas stocks in 2005 grew in value to $2.30 in 2013 – a return of 130 percent. Over the same time period $1 invested in all other assets grew to $1.68, a 68 percent return.
  • Oil and natural gas stocks, on average, accounted for 8 percent of the returns in the top public pension funds that were analyzed – despite making up just 4 percent of the holdings.

“In short, returns on state pension funds from investments in oil and natural gas companies provide strong earnings for public pension retirees, including America’s teachers, firefighters and police officers, according to the study,” said Kyle Isakower, API vice president of regulatory and economic policy, who briefed reporters during a conference call. Isakower:

“We already know that a healthy domestic oil and natural gas industry is good news for jobs and government revenue, and we now know that it also provides stability to the nest eggs that millions of Americans are counting on for a secure retirement. The key takeaway from this study is that during good economic times – or challenging ones – oil and natural gas investments far outperformed other public pension holdings. It’s important to remember that the owners of America's oil and natural gas companies are largely retirees and middle class Americans saving for retirement, according to a separate report by Sonecon.”

Sonecon’s Robert Shapiro also participated in the conference call and explained that the study, an updated version of a previous study by the company, examined the top two public pension plans in 17 states – California, Florida, Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina and West Virginia – involving about half of the people in the U.S. who are covered by such a plan. The study covered 2005 through 2013, the last year for which pertinent data is available, a period of economic boom, financial collapse and recovery. “We have a view of an entire business cycle,” Shapiro said. More Shapiro:

“When we look at all of the categories (of investments), what is consistent is that the returns on the holdings in oil and natural gas companies have exceeded the returns of every other asset class. This is very striking. … Overall the result is very clear. And this includes a period when the price of oil fell very sharply. … The fact is, the recent drop (in prices) is less severe than the one which is included in this analysis.”

Shapiro said one reason oil and natural gas stocks performed so well is because industry is a high investor in new technologies – which goes along with surging in domestic energy production. Shapiro:

“The lesson, frankly, from this analysis is that the pension plans would be in better shape if they increased their share of assets they invested in oil and natural gas.”

Some industry opponents have led very public efforts to pressure various institutional investors to divest themselves of oil and natural gas stocks. That a three-year campaign has persuaded relatively few to do so speaks to the performance of industry investments in stock portfolios, a recognition that these investments are vitally important to a lot of regular Americans and that interfering with those investments would be especially harmful to retired police, firefighters and teachers.

Isakower noted that a separate Sonecon study last year determined that individual investors who are not company executives or directors own 65.5 percent of the shares of U.S.-based, publicly traded oil and natural gas companies – most of them held in pension plans and retirement accounts including 401(k)s and IRAs. Officers and board members of U.S. oil and natural gas companies own less than 3 percent of total shares. Isakower:

“Millions of Americans rely on the income and capital growth these companies provide for investments and for their retirement.”

This is another reason sound energy policies and energy leadership are essential. Isakower said policymakers should focus on keeping America’s energy momentum moving forward by avoiding unnecessary new regulation and by increasing access to federal lands and foreign markets through the export U.S. crude oil and liquefied natural gas (LNG). Isakower:

“Duplicative regulations and 70s-era trade restrictions limit America’s growth as an energy superpower, and that’s exactly what other oil producing nations want.  For example, new ozone regulations proposed by the Obama administration aren’t necessary because air quality will continue improving as we implement the existing regulations.  Yet, as proposed, the new ozone rule could be the most expensive regulation ever imposed on the American public. We urge the administration not to impose stricter, unnecessary standards. We must also enhance LNG exports and repeal the crude exports ban to allow U.S. companies to trade with our allies overseas.  And, we must approve the Keystone XL pipeline.”

We need smart policies to sustain and grow the ongoing revolution in safe domestic energy production, which will help create jobs, boost the economy and strengthen American energy security. In the process, as the new Sonecon study shows, a lot of Americans’ retirement nest eggs will benefit, too. 


Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.