A decades-long consolidation spree by the energy sector’s “supermajors,” also known as Big Oil, was designed with shareholder returns in mind.
The strategic goal of these deals was to consolidate assets, streamline operations and maximize free cash flow from what are ultimately finite reserves. Executives also sought to prepare for heavier climate regulations by boosting efficiency and scale.
Yet acquisitions are rarely straightforward, and not all prove accretive. The latest example came in late September, when Chevron Corp. (ticker: CVX) disclosed a $200 million to $400 million third-quarter hit tied to its $55 billion acquisition of Hess Corp.
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The deal followed a high-stakes bidding war and court battle against Exxon Mobil Corp. (XOM), with Chevron justifying the premium paid as necessary to secure Hess’ reserves and better position itself against Exxon’s dominant Permian Basin operations.
Despite this setback, it’s unlikely Big Oil will ease up on dealmaking. In an industry facing intensifying regulations and a finite runway for fossil fuels, consolidation has become a necessity.
Like Big Tobacco in past decades, the energy sector’s survive-and-thrive strategy now revolves around aggressive cost cutting and efficiency gains to extract as much cash per barrel as possible, and then returning it to shareholders through aggressive dividends and buybacks.
Here are seven of the best energy ETFs to buy today:
| ETF | Expense ratio |
| Vanguard Energy ETF (VDE) | 0.09% |
| Energy Select Sector SPDR Fund (XLE) | 0.08% |
| Invesco S&P 500 Equal Weight Energy ETF (RSPG) | 0.40% |
| iShares Global Energy ETF (IXC) | 0.40% |
| SPDR S&P Oil & Gas Exploration & Production ETF (XOP) | 0.35% |
| Tortoise North American Pipeline Fund (TPYP) | 0.40% |
| VanEck Oil Services ETF (OIH) | 0.35% |
Vanguard Energy ETF (VDE)
“The main benefits of owning an energy ETF are not having to guess which company will outperform and reducing concentration risk by owning a broad basket of companies,” says Curtis Congdon, president of XML Financial Group. “Vanguard has a popular offering in VDE that provides low-cost, high-yield, diversified exposure to companies involved in the exploration and production of energy products.”
This ETF tracks the MSCI US Investable Market Energy 25/50 Index, which spans just over 110 small-, mid- and large-cap U.S.-listed energy stocks. Because VDE is market-cap weighted, the super-majors like Exxon Mobil and Chevron get allocated a much higher weight versus smaller players. The ETF charges a 0.09% expense ratio and currently pays a 3% 30-day SEC yield with quarterly distributions.
Energy Select Sector SPDR Fund (XLE)
“We prefer energy ETFs that are market-capitalization weighted versus equal weighted,” says Adam Grossman, global equity chief investment officer at RiverFront Investment Group. “We prefer this because we believe larger companies will have better access to capital and are more likely to have diversified businesses at the margin.” To focus more on large-cap energy stocks, consider XLE.
XLE draws its holdings from the S&P 500 index, which ensures a baseline for size, liquidity and earnings consistency. This results in a much narrower portfolio of just 22 large-cap stocks with significant emphasis in the biggest players, like Exxon Mobil, Chevron and ConocoPhillips (COP). XLE undercuts VDE slightly in terms of costs, with a 0.08% expense ratio, and currently pays a 3.2% 30-day SEC yield.
Invesco S&P 500 Equal Weight Energy ETF (RSPG)
“Equal weighting can provide broader exposure to the energy sector and allow investors to better experience broad industry fundamentals,” says Nick Kalivas, head of factor and core equity ETF strategy at Invesco. “Optimism over deregulation in the energy sector may also increase the profitability of smaller companies, although the price of oil remains a dominant factor.” For this role, Invesco offers RSPG.
“By equally weighting, RSPG provides a bias toward the smaller stocks in the S&P 500 energy sector,” Kalivas explains. “It underweights the largest names in the sector like Exxon Mobil and Chevron, while the quarterly rebalancing to equal weight also provides a value tilt.” However, this methodology comes at a higher 0.4% expense ratio. RSPG currently pays a 2.6% 30-day SEC yield.
iShares Global Energy ETF (IXC)
Two of the biggest players in global energy are the U.S. and the Organization of the Petroleum Exporting Countries, which coordinates output among member states to influence oil prices. But several other countries are home to major energy companies as well. Investors can access many of them through IXC, which tracks the S&P Global 1200 Energy 4.5/22.5/45 Capped Index. The various figures in this mouthful of a benchmark mean that no single holding can account for more than 22.5% of its weighting, and the sum of all stocks with more than a 4.5% weight cannot exceed a 45% weighting.
IXC is one of the broadest energy ETFs available, offering global reach while also diversifying across upstream, midstream and downstream segments. Notable holdings include Shell PLC (SHEL) and BP PLC (BP) from the U.K., as well as Canadian Natural Resources Ltd. (CNQ) and Enbridge Inc. (ENB) from Canada. The ETF charges a 0.4% expense ratio and currently pays a 3.6% 30-day SEC yield.
[READ: 7 Best Natural Gas Stocks and Funds to Buy]
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
Among the three main energy segments, the upstream side is the most sensitive to commodity prices. Exploration and production companies see margins fluctuate directly with oil and gas prices, which in effect creates built-in leverage. That volatility can be risky for long-term holders but useful for active traders looking to capitalize on price swings. For this role, XOP may be an ideal choice.
The fund tracks the S&P Oil & Gas Exploration & Production Select Industry Index and, like RSPG, is equally weighted but with a more targeted focus. XOP is one of the most popular ETFs among oil traders, offering excellent liquidity with a 0.02% 30-day median bid-ask spread and an options chain that includes weekly contracts. It charges a 0.35% expense ratio and pays a 2.3% 30-day SEC yield.
Tortoise North American Pipeline Fund (TPYP)
“Record-setting U.S. natural gas exports continue to expand America’s role in global energy markets,” says Mark Marifian, head of product at Tortoise Capital. “With nearly three-quarters of the portfolio focused on natural gas pipeline operators and local distribution companies, TPYP is well positioned to benefit from increased domestic consumption and surging liquefied natural gas exports.”
This ETF targets midstream companies, which handle the transportation, storage and distribution of oil and gas. TPYP’s portfolio includes both incorporated pipeline operators and master limited partnerships (MLPs). While incorporated firms pay standard corporate taxes, MLPs are pass-through entities that distribute most of their income directly to investors. TPYP currently pays a 3.9% 30-day SEC yield.
VanEck Oil Services ETF (OIH)
Investors can also gain exposure to the companies that provide the “picks and shovels” for upstream energy operations. In this case, that means equipment such as drilling rigs, pressure pumps, and seismic technology essential to exploration and production. Therefore, owning an oil services ETF like OIH is less a direct play on energy prices and more on the enablers that keep production running.
“Oil services companies are essential to sustaining and expanding global oil and gas production,” says Brandon Rakszawski, vice president and director of product management at VanEck. “OIH emphasizes industry leaders such as Schlumberger Ltd. (SLB), Halliburton Co. (HAL) and Baker Hughes Co. (BKR), firms that dominate global service capacity across onshore, offshore and deep-water operations.”
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7 Best Energy ETFs to Buy Now originally appeared on usnews.com
Update 09/29/25: This story was published at an earlier date and has been updated with new information.
