Read the following article and do the tasks that follow.
Energy ended up as a good bet last year. But now what? By J. Alex Tarquinio Jan 14, 2022
1. Energy companies defied the odds last year.
2. Despite a pandemic and pressure to phase out fossil fuels to combat global warming, the share
prices of major energy companies outshone the rest of the S&P 500.
3. Oil and natural gas prices, which soared 59 percent, were the main impetus for the energy stock rally.
4. But the boom wasn’t a steady one. Although energy stocks in the S&P 500 rose around 50
percent, it was an up-and-down year.
5. “The ride getting there has been extreme,” said Liz Ann Sonders, the chief investment strategist
at Charles Schwab. She cautioned investors thinking of jumping in now to “be mindful of the
peril of chasing sector performance based on what it has done in the past year.”
6. In 2021, oil prices rebounded from a decline in 2020, rising in response to growing demand as
the coronavirus pandemic appeared to be ebbing. That helped drive inflation, and consumers
grumbled about higher prices at the pump.
7. In November, President Biden led a multilateral effort – which included Britain, Japan, South
Korea, India and China – to release oil from national reserves. OPEC PLUS, a group of oil-
producing nations, agreed to increase supply gradually. Adding to uncertainty about the oil
prices are the still unclear effects of the Omicron variant of the Covid-19 virus on the economic
recovery. Longer term, there are major questions about how the world might make the
transition to cleaner forms of energy like solar and wind power from oil, coal, and natural gas.
8. David Lebovitz, a global market strategist at J.P. Morgan Asset Management, said the large
integrated oil and natural gas producers are working on developing renewable energy
technologies in a bid to stay relevant. “They have one foot on either side of the energy line,” he
said, “so it’s a way for investors to play both sides of the story if they don’t want to make a commitment.”
9. Funds that invest in the energy industry tend to be dominated by these global companies. For
examples, the Energy Select Sector SPDR, an exchange-traded fund run by State Street Global
Advisors that ended the year with $26.4 billion in assets, had total returns of 53.26 percent in
2021 after a management fee of 0.12 percent. Forty-four percent of the portfolio is invested in
two companies, Exxon Mobil and Chevron.
10. Michael Jin, a senior equity research analyst at Epoch Investment partners, a New York
subsidiary of Toronto-Dominion Bank, says U.S utility companies are beginning to embrace
solar and wind turbines. “We kind of tiptoed into investing in renewable energy through the
utilities sector,” he said. “It’s a good way to gain exposure. They are still able to generate cash flow and pay dividends.”
11. Utility funds, traditionally viewed as generators of steady income because of their holdings in
regulated public utilities, posted strong returns last year. The Vanguard Utilities exchange-
traded fund, with $5.6 billion in assets, returned 17.33 percent in 2021 after the 0.1 percent
management fee. The fund’s yield was 2.7 percent.
12. How much demand there will be for oil in the coming decades remains a crucial issue for
energy investors. A recent Morningstar report forecast that global oil demand will peak around
2030 and then gradually decline. By the middle of this century, the report estimates, the global
economy will consume 11 percent less oil than it did in 2019, in large part based on the
projection that more than half the traffic on the world’s roadways will be electric vehicles.
13. “We’re bullish on the adoption of electric vehicles,” said Dave Meats, the director of research
for energy and utilities at Morningstar. In part, he said, that is because China has been
subsidizing the development of electric vehicle technology in the hope of dominating this global market in the future. (638 words) Exam tasks
I. Word search (2.5 points)
Find words or phrases which carry the following meaning in the article.
1. Something that encourages/stimulates a specific process or activity to be more effective. : impetus
2. Something that is particularly dangerous. peril 3.
Involving a group of two or more countries. Multilateral EFFORT
II. Words and phrases explanation (3 points)
Explain the following words and expressions, as used in the article. 1.
Defied the odds (paragraph 1)= combat with the argument / overcome the obstacles 2.
Appeared to be ebbing (paragraph 6)=had a tendency to lessen / decrease / seemed to have been weakened 3.
Embrace solar and wind turbines (paragraph 10)= accept solar and wind turbines
/UTILIZE ENERGY FROM SUNLIGHT AND WIND
III. Comprehension questions (4.5 points)
Read the article and answer the following questions, using your OWN words.
1. What did Liz Ann Sonders advise investors to do?
She advised investors to think of jumping in now to “be cautious about the danger of
chasing sector performance based on what it has done in the past year.”
2. What were the solutions taken by countries to meet the growing demand for oil?
The solutions taken by countries to meet the growing demand for oil were including :
OPEC PLUS, a group of oil-producing nations, agreed to increase supply gradually.
David Lebovitz, a global market strategist at J.P. Morgan Asset Management, said the
large integrated oil and natural gas producers are working on developing renewable
energy technologies in a bid to stay relevant.Moreover , U.S utility companies are starting
to accept solar and wind turbines. 3. What might be according the future for oil
to the report from Morningstar?
According to the report from Morningstar , global oil demand will be on top around 2030 and
then gradually decrease .By the middle of this century , the report estimates , the global economy
will consume 11 percent less oil than it did in 2019, in large part based on the projection that
more than half the traffic on the world’s roadways will be electric vehicles. -THE END-