Well, this will be a shorter post than usual. All I know about the oil industry is essentially two things:
1) There’s drilling and refining.
2) Oil is a commodity.
Number 1 means that every oil company essentially has two segments: the drilling & exploration and then the refining. Every major oil company engages in both, but some are specialized in one over the other. Exxon, for example, specializes in drilling and exploration. So when the price of oil is depressed like it is now in October 2015, the stock get crushed. Oil rigs are a fixed cost, so falling oil prices kill the margins. Valero or Phillips 66 is an example of a refiner. Those companies actually do quite well when the price of oil is depressed, because part of their cost is buying oil to refine.
Number 2 means that oil companies have zero pricing power. They sell oil. No one cares where the oil comes from. Presumably, there is actually a difference, but I’ll be damned if I don’t just buy the cheapest gas for my Honda Accord. I prefer companies that buy commodities and sell brands, like Apple. I tend to stay away from companies that are at the mercy of macro-economic factors beyond their control, like the oil industry.
I own AAPL.
Written in 2015