Recently, the Middle East situation has flared up again, and many people have started asking me: Can I still buy oil stocks now? Honestly, the answer to this question is not that straightforward—it depends on how you understand the oil price cycle.

Let’s start with the current picture. Brent crude oil recently surged past $100 for a time due to geopolitical risk, but it’s now hovering around the $90 level. This year, its increase has already exceeded 60%. However, there’s a key fundamental issue here: according to forecasts from the IEA and EIA, the global oil market in 2026 will actually be oversupplied, with a daily surplus of 1.87 million barrels. In other words, unless the conflict keeps escalating, it will be difficult for oil prices to hold at high levels over the long term—which is also why you can buy oil stocks, but you shouldn’t blindly chase after the highs.

I’ve found that many people, when picking oil stocks, have the habit of looking straight at the gainers’ leaderboard. This is actually the easiest way to step into a trap. What truly determines whether an oil stock will rise is where it sits in the industry chain. Even if they’re all called “oil stocks,” when oil prices rise, some can reap extraordinary profits directly, while others may see their costs increase instead.

Upstream exploration and production companies (such as ExxonMobil XOM and ConocoPhillips COP) are the most sensitive to oil prices. If oil rises by $1, their profits can be amplified by $20–30. Midstream pipeline companies (such as Canada’s Enbridge ENB) earn through transit and toll fees (pass-through charges), so oil price fluctuations affect them only minimally. Downstream refining and petrochemical companies (Formosa Petrochemical and Formosa Plastics) need to look at the spread between input raw-material costs and finished product selling prices. When oil prices surge, their raw material costs rise as well; if they can’t catch up with increases in product prices, their profit margins get squeezed.

For Taiwan investors, the Formosa Four is the easiest target to access. Formosa Petrochemical is Taiwan’s only refinery. When oil prices rise moderately and downstream demand stays steady, the crack spread can remain within a reasonable range, allowing gross margins to stay stable. In that situation, buying Formosa Petrochemical and trading in line with oil price trends can work out well. Formosa Plastics, Nan Ya, and Taiwan Fertilizer are more geared toward the petrochemical sector, so you need to look at the entire petrochemical cycle—not just oil prices.

If you want to get exposure to U.S. stocks, ExxonMobil and Chevron are global oil and gas leaders, with business spanning both upstream and downstream. When oil prices rise, the whole industry benefits. But because of their large scale and diversified assets, they’re also relatively more resilient when oil prices fall. Enbridge has a dividend yield as high as 7%, with stable cash flow, making it suitable for those who want to hold for dividends.

That said, even if oil stocks can be bought, you must also recognize the risks. The biggest short-term risk is a sudden, sharp drop in demand—oil prices could plunge by 20–50%, and oil stocks would also suffer a major setback. Over the long term, pressure from the energy transition (electric vehicles, carbon tariffs) will limit the valuation upside for upstream companies. Also, some companies over-expand and take on debt when oil prices are high; eventually, during the low point of the cycle, they fall into crisis—like BP, which cut dividends by 60% back then due to cash-flow pressure.

For retail investors, you don’t need to chase high-investment, high-return oil stocks. The simplest approach is to buy an oil ETF, such as Yuanta Oil ETF. With around NT$3,000, you can get in—no need to research individual stocks. If you want to select stocks yourself, you can combine holdings like Formosa Petrochemical and Formosa Plastics: you can profit from oil-price swings and also receive steady dividends. For those able to access U.S. stocks, a combination of Enbridge and ExxonMobil can be considered to enjoy high dividends while capturing global oil price trends.

After all, oil stocks can be bought—but remember that they’re about “making quick money and making money from the cycle,” not about relying on dividends to sit back and earn long-term. Once the economic cycle reverses, a 30–50% pullback is normal. The key is controlling your position size and setting stop-losses, so you can generate steady returns amid cyclical volatility. At this point in time, instead of asking “Can I buy?,” it’s smarter to ask “How to buy” and “How much to buy.”