Investing in oil isn’t for everyone—and fair enough. Oil stocks have soared and crashed more than once, and the industry’s future looks murky at best.
Still, some of the richest people in history—Rockefeller, Getty, the Koch brothers—built their fortunes on black gold. Oil made empires. And despite the crashes, it’s still pumping through nearly every part of our modern economy. Cars, planes, fertilizers, plastics, packaging, clothing, even cosmetics—oil's reach goes far beyond the gas pump.
After oil prices topped $100 per barrel for years, they tanked in 2014 and again in 2020—when demand collapsed during the pandemic and a Saudi-Russia price war flooded the market. Prices briefly went negative. Yes, negative. Today, prices hover around $80 a barrel, but with supply tight and global tensions high, a new rally may already be underway.
This guide will walk you through how to invest in oil—the good, the bad, and the philosophical. Because even if oil isn’t a fit for your Halal portfolio or your long-term environmental, sustainable and governance (ESG) goals, betting on a limited resource that powers everything from shipping to shampoo might still be worth 5% of your portfolio.
How much do I need to start investing in oil?
Before you begin, let’s understand if you can even go there. Luckily, investors can start investing in oil with as little as $1,000 in a trading account at an online brokerage, like Questrade. From there, they’d need to decide whether to invest in individual stocks, or in an oil ETF. Personally, with little money to invest in oil, I’d opt for an ETF to diversify my investment and get exposure to more oil companies.
Don’t put all of your eggs in the oil & gas basket. Start with a small investment to see how it performs and also to see how you behave as an investor with a volatile portfolio like oil.
Investing in oil has historically been a pathway to substantial wealth, with industry titans like John D. Rockefeller and Jean Paul Getty amassing fortunes from "black gold." Despite periods of volatility, the oil sector continues to present opportunities for investors.
Canadian energy giants, Suncor Energy (SU) and Canadian Natural Resources (CNQ), have demonstrated significant long-term growth.
As of March 26, 2025, CNQ's stock price stands at $31.31, with a market capitalization of $65.7 billion. Suncor's stock has experienced fluctuations, reaching an all-time high of $72.95 USD on May 20, 2008, and a low of $0.02539 USD on September 2, 1981.
The global oil market continues to evolve, with the International Energy Agency (IEA) forecasting a rise in global oil demand by 1.03 million barrels per day in 2025. However, projections indicate that oil supply may exceed demand by over 1 million barrels per day in 2025, leading to a potential surplus.
These dynamics suggest that while the oil industry faces challenges, it remains integral to the global economy, offering potential investment opportunities for those who navigate its complexities wisely.
The fortunes of oil and gas companies are closely tied to crude oil prices, particularly the West Texas Intermediate (WTI) benchmark. When WTI trades above $100 per barrel, oil stocks typically surge. For instance, in July 2008, WTI reached an all-time high of $147.27 per barrel.
Conversely, during downturns, oil stocks can plummet. In April 2020, amid the COVID-19 pandemic and a Saudi-Russia price war, WTI prices briefly turned negative. However, the market has since rebounded. As of March 27, 2025, WTI crude oil is priced at $69.88 per barrel.
This volatility underscores the cyclical nature of the oil market, where periods of high prices often lead to increased production, eventually causing oversupply and price declines, followed by reductions in production and a subsequent price recovery.
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The best strategies to invest in oil
When I was a new investor in 2010, I was enamoured with Canadian dividend paying stocks and that approach led me to owning shares in several individual companies in the oil & gas sector – including blue chip stocks like Canadian Natural Resources and Suncor. Fast forward to 2015 and those stocks were down more than 30% from my original purchase price.
I ended up selling those investments, along with the rest of my individual stocks, and switching to index investing with ETFs. But savvy investors looking to profit from a potential oil market rebound could find great value investing in individual oil stocks.
Yield-hungry investors often seek oil stocks with attractive dividends. Here's an updated look at some notable options:
Dividends can be at risk of being suspended, cut, or eliminated during challenging economic times. Therefore, some investors prefer to hunt for value using metrics like the price-to-book (P/B) ratio, where a lower ratio is often seen as beneficial.
Over the past year, these stocks have experienced varying performance:
- Canadian Natural Resources (CNQ): The stock has decreased by approximately 19.96% over the past year. MarketWatch
- Cenovus Energy (CVE): The stock has declined by about 25.28% over the past year.
These fluctuations highlight the inherent volatility in the oil sector, emphasizing the importance of thorough research and diversification when considering investments in this industry.
Investing in individual oil stocks can be risky due to market volatility and company-specific factors. A more diversified approach is to invest in oil-focused Exchange-Traded Funds (ETFs), which provide exposure to a broad range of companies within the energy sector. ETFs offer diversification at an affordable price, reducing the risk associated with investing in a single stock.
Here are some top oil ETFs trading in Canada:
| Best oil ETFs in Canada | Fast facts |
|---|---|
| iShares S&P/TSX Capped Energy Index ETF (XEG) |
Overview: Seeks to replicate the performance of the S&P/TSX Capped Energy Index, providing exposure to Canadian energy companies.
Net Assets: Approximately CAD 2.15 billion Management expense ratio (MER):0.60% Dividend yield: Varies based on underlying holdings and market conditions. |
| BMO Equal Weight Oil & Gas Index ETF (ZEO): |
Overview: Tracks the Solactive Equal Weight Canada Oil & Gas Index, holding 11 large-cap Canadian oil and gas stocks with equal weighting.
Net Assets: Approximately CAD 253 million MER: 0.55% Dividend yield: Approximately 4.07%, distributed quarterly |
| Horizons S&P/TSX Capped Energy Index ETF (HXE) |
Overview: Aims to replicate the performance of the S&P/TSX Capped Energy Index, offering exposure to Canadian energy companies.
MER: 0.27% |
| Horizons Crude Oil ETF (HUC) |
Overview: Tracks the Solactive Light Sweet Crude Oil Winter MD Rolling Futures Index ER, providing exposure to crude oil futures rather than holding oil company stocks.
MER: 0.98% |
| Canadian Crude Oil Index ETF (CCX) |
Overview: Designed to measure the performance of the Canadian crude oil market by tracking the Canadian Crude Excess Return Index.
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When considering investing in oil ETFs, it's essential to evaluate factors such as the ETF's structure, underlying holdings, MER, and dividend policies. Diversifying through ETFs can mitigate some risks associated with the volatile energy sector, but investors should remain aware of market dynamics and geopolitical factors that can influence oil prices.
Investing in oil can be approached through various instruments, including commodities and Exchange-Traded Funds (ETFs). While these avenues offer potential for profit, they also carry significant risks, especially with leveraged and inverse ETFs. These specialized ETFs aim to deliver multiples or the inverse of the daily performance of a specific index or commodity, such as oil. Due to their complex nature and potential for amplified losses, they are generally suited for experienced investors with a high risk tolerance.
Investors can also trade oil futures (commodities) or even other ETFs that follow the global oil market prices. Beware, some of the more exotic leveraged ETFs can quickly get an investor into hot water.
Horizons offers a suite of ETFs that provide leveraged, inverse, and inverse leveraged exposure to different equity and commodity indices. They’re aimed at savvy investors looking to take on additional risk in their portfolio, but in reality, investors would have to be crazy to trade these products.
Understand that leveraged and inverse ETFs are complex financial instruments intended for short-term investment horizons. They require active monitoring and a clear understanding of the associated risks. Before investing, ensure these products align with your investment objectives and risk tolerance. Consulting with a financial advisor is recommended to determine suitability for your individual circumstances.
Possible risks and rewards of investing in oil
Depending on your worldview, investing in oil could lead to massive gains—or end up as a footnote in the transition to a greener economy.
Pros
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Global demand is still high: The IEA expects oil demand to reach 103.2 million barrels per day in 2024, with continued growth into 2025.
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Oil is everywhere: From jet fuel and shipping to plastics and fertilizers, oil powers more than just your commute.
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Dividend potential: Major oil producers often pay generous dividends, making them attractive to income-seeking investors.
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Low prices = buying opportunity: For value investors, the sector may be undervalued compared to historical highs.
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Energy security is back in focus: Geopolitical tension has reminded countries that oil still matters—big time.
Cons
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Volatile prices: Oil has crashed hard before—2014, 2020—and it can happen again.
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Supply may outpace demand: Some 2025 forecasts suggest we could see a glut, pushing prices down.
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Policy is shifting green: Governments worldwide are investing heavily in clean energy and electric vehicles.
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Long-term decline risk: As the world transitions to renewables, oil could become a shrinking piece of the energy pie.
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Geopolitical risk: War, sanctions, OPEC decisions — all can move prices overnight.
Dos and don’ts of investing in oil
If you’re getting into oil, expect a wild ride. Boom-and-bust is part of the deal. Here’s how to play it smart:
- ✅ Do invest in big-name, blue-chip oil companies with strong cash flow and healthy balance sheets. Think Suncor, CNQ, or Exxon—firms that can weather storms and still pay dividends.
- ✅ Do look at ETFs for broader exposure. You’ll reduce your risk by owning a basket of energy stocks rather than betting on one company to strike gold.
- ❌ Don’t chase penny stocks or junior explorers that rely on debt and luck. That’s gambling, not investing.
- ❌ Don’t dabble in leveraged ETFs unless you fully understand them. These products reset daily, amplify losses, and are better suited for traders, not long-term investors.
Is oil a good investment today?
That depends on what you believe. Some see oil stocks as undervalued, especially after lagging behind tech and clean energy in recent years. Warren Buffett recently doubled down on Occidental Petroleum, which shows that old-school energy still has fans in high places.
But make no mistake — this isn’t the ‘80s or 2000s. Climate policy, EV growth, and clean tech investments are reshaping the global energy mix. If demand peaks earlier than expected, today’s oil prices (hovering around $70–$80 per barrel) could be the new ceiling, not the floor.
Final word
No one has a crystal ball. Oil might never lead the market again—but it’s not dead yet. The world still runs on it, and that gives the sector a pulse investors can’t ignore.
If you’re unsure, online brokerages make it easy to dip a toe in with ETFs or a few shares of a dividend-paying stock. You don’t need to go all-in. A small slice — 5% of your portfolio — might be enough to ride the next wave without wiping out your retirement if it crashes.
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Robb Engen is a leading expert in the personal finance realm of Canada and is also the co-founder of Boomer & Echo, an award-winning personal finance blog.
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