Those who have been watching the oil market recently should have a feeling: as geopolitical tensions heat up, oil prices become volatile. Brent crude oil surged from over $90 to $120, prompting many to reevaluate oil concept stocks. But honestly, many people’s approach to buying oil stocks is actually backwards — instead of just looking at the top gainers and jumping in, you need to understand where these companies sit in the industry chain; only then will you know who truly profits when oil prices rise.

I’ve noticed an interesting phenomenon: under the same label of oil concept stocks, when oil prices go up, some companies’ profits double directly, while others are squeezed by rising costs and struggle to breathe. The difference lies in whether they are upstream oil exploration and production, midstream transportation, or downstream refining and selling. Upstream exploration and production companies (like ExxonMobil XOM and ConocoPhillips COP in the US stock market) are most sensitive to oil prices; for every dollar increase, their profits can amplify by 20 to 30 dollars. But downstream refineries (like Formosa Petrochemical 6505) are different — they rely on the spread between crude oil costs and finished product prices. If oil prices rise too fast, it can actually compress their margins.

For Taiwanese investors, Formosa Plastics’ four major affiliates are the most familiar options. Formosa Petrochemical, as the only refinery in Taiwan’s stock market, has the simplest logic — buy crude oil from CPC, refine gasoline and diesel, and sell them for profit from the spread. When oil prices rise moderately and downstream demand remains steady, its gross margin can hold up, and its stock price will follow oil price trends. Companies like Formosa, Nan Ya Plastics, and Taiwan Fertilizer are more in the plastics and chemical sectors; their stories are more complex, involving the entire petrochemical cycle, so you can’t just focus on oil prices alone.

If you get the chance to access the US stock market, your options for selection are even more flexible. Enbridge (ENB) in Canada is a typical stable cash flow company — it earns from transportation fees, with 30% of North American oil passing through its pipelines. Oil price fluctuations have little impact on it, but it offers a high dividend yield of 7%, making it suitable for those seeking stable income. ExxonMobil, as a global oil and gas leader, covers upstream and downstream businesses; when oil prices rise, the entire industry benefits. Its large scale and diversified assets also give it stronger resilience when the market turns.

But here’s an important point about risks. By 2026, the global oil market is expected to be oversupplied, with the IEA forecasting a daily surplus of 1.87 million barrels — this is a core factor suppressing long-term oil price growth. If conflicts in the Middle East ease quickly, oil prices could fall sharply, and oil stocks might correct by 10-20%. Plus, the long-term pressure from energy transition, electric vehicle adoption, and carbon tariffs will limit the valuation space for upstream companies.

For small investors, directly buying oil ETFs is the easiest way — for example, Yuanta Oil ETF tracks global oil benchmarks, and you can get in for under 3,000 TWD without researching individual stocks. Or combine it with companies like Formosa Plastics and Taiwan Plastics to follow oil price swings and profit from spreads, while also earning stable dividends. If you want to participate in short-term volatility, trading US oil concept stocks via CFD is also an option — low barrier, simple process, starting from just a few dozen dollars.

Ultimately, oil stocks are meant for “quick money and cyclical profits,” not for long-term dividend income. When the economic cycle reverses and oil prices fall, a 30-50% correction is normal. So never go all-in; always control your position size and set stop-loss orders to ensure steady gains during this oil price rally. The key now is to keep an eye on geopolitical developments and oil price trends, adjusting your strategy in time and not getting blinded by short-term gains.