Recently, I noticed an interesting phenomenon: when discussing oil stocks, many people only look at the top-percentage gainers, yet they overlook a key point—although many are labeled as “oil concept” stocks, oil prices affect them very differently. Some directly benefit, while others see costs rise and profits get squeezed.

Let’s start with a simple logic. The oil industry chain is divided into upstream, midstream, and downstream; depending on where a company sits, its fortunes differ. Upstream exploration and production companies—such as ExxonMobil (XOM) and ConocoPhillips (COP)—see profits amplified directly for every $1 increase in oil prices, making them the most sensitive to oil price movements. Midstream companies—such as Canada’s Enbridge (ENB)—mainly earn transportation fees and are affected by oil price fluctuations only minimally. Downstream is more complicated. Companies such as Formosa Plastics, Formosa, South Asian, and Taiwan Chemical have crude oil as their production cost; in the end, they sell gasoline, diesel, and plastic raw materials. Here’s the counterintuitive logic: when oil prices fall sharply, their input costs drop, which means they can actually become oil-price-decline beneficiaries. Once profit margins widen, their earnings may improve even more.

When it comes to Taiwan’s oil concept stocks, many people’s first reaction is the “Formosa Four Treasures.” Formosa Plastics is Taiwan’s only refining company, and the logic is the most straightforward: it purchases crude oil from CPC, refines it, and then sells gasoline and diesel. Its profit is essentially the crack spread—the difference between the selling price of refined products and the cost of crude oil. When oil prices rise moderately and downstream demand is steady, it tends to do well. But if oil prices surge and drive costs much higher while refined product prices can’t keep up, you can end up with a situation where oil-price “up” stocks don’t rise. Formosa, South Asian, and Taiwan Chemical pay more attention to the “petrochemical cycle”—they don’t just trade the oil price. They look especially strong only when oil prices are stable, downstream customers’ demand is strong, and buyers are willing to accept higher product prices.

There are far more options in U.S. stocks. If you want both high sensitivity and resilience, ExxonMobil and Chevron are global leaders. Their businesses cover both upstream and downstream: when oil prices rise, the entire industry chain benefits; when oil prices fall, their large scale and diversified assets often provide a stronger buffer. If you want steady cash flow, Enbridge’s dividend yield is as high as 7%. With low volatility and stable payouts, it’s a classic “stock to hold for dividends” candidate. If you can tolerate volatility and want to make fast money, upstream exploration companies and LNG plays (Cheniere Energy) offer the greatest flexibility—but also the highest risk.

The current environment is quite interesting. The Middle East situation is unstable. Brent crude oil once broke through the $100–$120 range, but it has since pulled back to around $90–$92, and the annual gain has already exceeded 60%. However, authoritative institutions forecast that in 2026 the global oil market will be in overall oversupply, with a daily surplus of 1.87 million barrels. This is the core factor that suppresses oil prices from rising sustainably. In other words, if conflicts ease, a rapid drop in oil prices is very possible. In that scenario, those oil-decline beneficiary stocks with strong cost structures may actually perform more steadily.

For retail investors, buying an oil ETF directly is the simplest option: low barrier to entry, diversified risk, and you can get started with less than 3,000 New Taiwan dollars. If you want to pick individual stocks, Formosa Plastics together with Formosa can both capture value from oil-price swings and also hold stable dividends. If you can access U.S. stocks, a combination of Enbridge and ExxonMobil is a good pairing—one provides stable, high income, while the other captures global oil price trends.

But it’s important to remind everyone: oil stocks are made for cyclical gains and quick money—not for long-term “lying back and earning” on dividends. Once the economic cycle turns and oil prices decline by 30–50%, such pullbacks are normal, and oil stocks will likely suffer as well. The key is to set stop-losses, control position sizes, and trade steadily through the cycle’s fluctuations. Especially those companies that were overly optimistic at oil price highs and aggressively expanded production by taking on large amounts of debt—these are the most likely to stumble during the cycle’s downturn.

Overall, oil stocks still have investment value. Energy demand continues to increase. Europe needs U.S. liquefied natural gas, and China is also the world’s second-largest oil-consuming country. But remember one thing: before choosing stocks, understand which part of the industry chain they belong to, whether oil price moves are a tailwind or a headwind for them, and don’t just chase short-term gain ranking—that’s the easiest way to get trapped.