Energy ETFs allow investors to gain exposure to a wide assortment of energy investment opportunities ranging from broad / general energy ETFs to those that are more narrowly focused such as oil and gas ETFs, nuclear energy ETFs, and alternative energy ETFs to name a few.
It is worth noting that many energy ETFs are dependent upon commodity prices and as a result can be relatively volatile.
To find out more about investing in the energy sector, scroll down to check out the following lists of energy ETFs (clicking on a ticker will open up a host of insightful charts for that particular energy ETF).
U.S. Energy ETFs
Don’t have a strong opinion about what energy subsector should be your focus, then you may want to consider a broad energy ETF.
One of the benefits of going broad in the energy sector is diversification. For example, one subsector could be doing well while another struggles.
The following is a list of broad energy ETF’s that are focused on U.S. based companies.
Global Energy ETFs
For those that are interested in diversifying their energy holdings beyond U.S. borders, there exist several non-U.S. energy ETF options.
For example, there are a few general global ETFs that are not hindered by geopolitical boundaries. There is also the option to focus on another large economy with a China energy ETF.
Going global can add further diversification to your energy investments.
Clean Energy ETFs
Some energy ETFs focus on the broad alternative energy sector which includes solar, wind, geothermal, and biofuels to a name a few.
These clean energy ETFs typcially follow an index composed of companies that generate revenue from renewable sources of energy or the development of related clean technologies.
Solar Energy ETFs
While the list above includes broad clean energy ETFs, some investors are looking for more of a pure-play.
For example, solar energy costs have come down dramatically — to an extent where it is now competitive in many areas of the globe.
To that end, the Invesco Solar ETF (TAN) tracks the MAC Global Solar Energy Index which includes global energy companies mainly focused on generating revenues from solar related activities.
Wind Energy ETFs
Another significant clean energy sector is wind.
Like solar energy, the cost of wind energy has come down dramatically as wind turbines have steadily increased in size in addition to increased production and other efficiency gains.
So how does an investor get direct exposure to wind?
The First Trust Global Wind Energy ETF (FAN) specifically targets the wind energy sector. FAN tracks the ISE Clean Edge Global Wind Energy Index which includes 60% pure-plays and 40% diversified companies which are involved at least in part in the wind energy industry.
Nuclear Energy ETFs
Another significant energy sector is nuclear power.
While nuclear energy has the benefit of zero carbon emissions, it does have the challenge of nuclear waste and relatively high cost.
Some nuclear energy ETFs include companies involved in the nuclear segment (e.g., design and construction of nuclear power facilities, electricity generation from nuclear sources, supply & services to the nuclear power industry) but others can also include uranium miners or companies that actually hold physical uranium.
Oil and Gas ETFs
Oil and gas ETFs offer a wide variety of exposure to the oil and gas sector while diversifying risk often seen in the highly volatile oil and gas markets.
There are two ways to invest in oil and natural gas ETFs. You can choose an oil and gas ETF that tracks price of oil or natural gas directly. These commodity type oil and gas ETFs provide direct exposure to the price of oil and gas by purchasing oil or natural gas futures. An example of such an ETF is the Invesco DB Oil Fund ETF (DBO) which tracks an index of crude oil futures contracts.
The other type of oil and natural gas energy ETF is an oil and gas exploration and production ETF. These oil and gas E&P ETFs don’t follow the price of oil and natural gas but rather track companies that derive a large portion of their revenues from drilling and exploration activities. For example, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks the S&P Oil & Gas Exploration & Production Select Industry Index — an equal weighted index of U.S. companies in the oil and gas exploration and production segment. Note that since XOP tracks an index that is equal weighted and not market-cap weighted, this oil and gas ETF offers greater exposure to small and mid-cap oil and gas companies.
Oil and gas markets can be quite volatile. To get a sense of how much you could lose in one day, here is a chart of the biggest losses for XOP.
Notice how one day losses can be sizable. As a result, these types of ETFs are typically not for long-term investors but rather suited for traders.
If you want to go deeper and see a host of charts related to any of the ETF listed, simply click on the ETF name in the table above or enter the ETF ticker or name on the menu bar and dive in.
Energy Infrastructure ETFs
Whether you are interested in broad energy or clean energy, energy infrastracture is key to bringing energy to market.
Energy infrastructure ETFs include companies (often MLPs) involved in midstream energy activities including energy gathering and processing, liquefaction, energy transportation (e.g., pipeline, rail), and storage. Other energy infrastructure ETFs focus on clean energy infrastructure by requiring minimum levels of revenues derived from the smart grid and the electrical energy infrastructure sector.
Energy Services & Equipment ETFs
If you are interested more specifically in the upstream process of the oil and gas industry, particulary the oil industry, energy services and equipment ETFs may be of interest.
Energy services and equipment ETFs offer exposure to companies that supply equipment and services to oil fields and offshore platforms.
Inverse Energy ETFs
Another type of energy ETF is the inverse energy ETF.
What these ETFs do is simply go in the opposite direction of the energy companies or energy index they follow.
For example, the ProShares Short Oil & Gas -1x ETF (DDG) offers an inverse play on large U.S. oil and gas companies by providing inverse exposure to the Dow Jones U.S. Oil and Gas Index. So on a day where the Dow Jones U.S. Oil and Gas Index is down 2%, an inverse energy ETF tracking the Dow Jones U.S. Oil and Gas Index will be up 2%.
Leveraged Energy ETFs
The final type of energy ETF is the leveraged energy ETF.
These ETFs track an index tracking energy companies or its inverse and apply a multiple in performance (e.g., 2x, 3x, -2x. -3x).
As an example, DIG, the ProShares Ultra Oil & Gas 2x ETF, provides 2x the performance of large U.S. oil and gas companies tracked by the the Dow Jones U.S. Oil & Gas Index.
In the case of a -3x leveraged energy ETF, it will gain 3% on the day if the index it tracks is down by 1%.
Conversely, if that energy index is up 1%, the -3x leveraged energy ETF will be down 3%.
Energy ETFs FAQ
Do any ETFs track the energy sector?
Yes. There are 64 ETFs that track the energy sector or one of its subsectors.
What is the lowest cost energy ETF?
The lowest cost energy ETF is the Fidelity MSCI Energy ETF (FENY). It has an expense ratio of 0.08%.
Which energy ETF is the oldest?
SPDR Energy Sector ETF (XLE) is the oldest energy ETF. It was launched on December 16, 1998.
Do energy ETFs pay dividends?
There are 46 energy ETFs that pay dividends. The largest energy ETF that pays a dividend is the SPDR Energy Sector ETF (XLE).
Do any ETFs track the clean energy sector?
Yes. In fact, there are a total of ten clean energy ETFs. The largest clean energy ETF is the iShares Global Clean Energy ETF (ICLN).
Is there an ETF that tracks the nuclear energy sector?
There are two ETFs that track nuclear energy in some form. The largest nuclear energy ETF is the North Shore Global Uranium Mining ETF (URNM).
Is there a Vanguard energy ETF?
There is one Vanguard energy ETF — the Vanguard Energy ETF (VDE).
Does Invesco have an energy ETF?
There are eleven Invesco energy ETFs. The largest is the Invesco Solar ETF (TAN).
Does iShares have an energy ETF?
There are six iShares energy ETFs. The largest is the iShares Global Clean Energy ETF (ICLN).
Are there any 3x energy ETFs?
There is one 3x energy ETF — REX US Big Oil 3x ETN (NRGU).
Is there an energy ETF that pays monthy dividends?
Yes, only one. The actively managed energy ETF InfraCap MLP ETF (AMZA) pays monthly dividends.
How many energy ETFs are actively managed?
Of 64 energy ETFs, three are actively managed. The largest of these is the FT North American Energy Infrastructure ETF (EMLP).