Stake in the Game: Oil and Gas Retirement Account Investments

Inside Energy

Inside Energy

STAKE IN THE GAME? First in a series of stories exploring the financing oil and gas development:  Financing The Boom.  Oil Prices are falling to levels not seen in years, undermining a U.S. energy boom largely dependent on those prices staying high. Consumers are reaping the benefits at the pump, but volatility in the oil industry could be hurting average Americans somewhere else – in their investment accounts.

While consumers continue to feel relief at the gas pump due to falling oil prices, the story is more complicated for another piece of their financial picture. Nearly all U.S. retirement accounts are solidly invested in oil and gas companies, many of which have seen their stock prices slide alongside crude oil. Oil was sitting at under $77/barrel late this month, down from over $100/barrel this summer.

Wanting to see just how much stake the average person has in oil and gas, we found that the most direct way to get access to sensitive, personal financial information was if we analyzed one of our own retirement accounts. I humbly volunteered my own T. Rowe Price Roth IRA.

TRowe Word Cloud

TRowe Word Cloud

It’s a meager account, containing a little more than $4,200 at this point, and analyzing it for my oil and gas holdings revealed how complex the modern retirement portfolio really is.

My $4,200 splits among 19 smaller funds, which are invested in thousands of sources. The list ranges from companies like Tootsie Roll Industries and WD-40 to countries like Norway and even World Wrestling Entertainment.

It turns out a little less than six percent of my IRA is directly invested in oil and gas companies, or about $243.

Scott Middleton, who works with investment consulting company Innovest, said this mirrors the national average for retirement investments in energy at somewhere between 5 to 10 percent.

It’s true for IRA accounts like mine, as well as for others like 401Ks, 403Bs and pension funds.

The Colorado Public Employees Retirement Association, for example, has about seven percent of its total portfolio in the energy sector, which in Wall Street-speak basically means just oil and gas. It makes up about nine percent of the total stock market.

Middleton said as oil prices shrink, so too does my $243 in oil and gas investments. And so do most of the other funds invested in the same stocks.

A couple of things to remember, though. For one, I’m betting on my retirement account for the long term. The account is based upon the premise that I won’t start withdrawing from it until 2055, although thinking I won’t retire for another 40 years seems ambitious to me at this point, or irrational.

Anyway, the point is short-term fluctuations in price shouldn’t really concern us. Over the long-term, the energy sector has been considered a very safe investment, yielding about a 10-percent annual rate of return.

Also, while declining oil prices might be bad for one part of my portfolio, they’re good for other parts. For example, Middleton said chemical producers and transportation companies tend to do well with lower oil prices.

Ultimately, oil and gas is not a critical part of our retirement funds. But, make no mistake, our retirement funds are absolutely critical for the oil and gas industry. The American Petroleum Institute says about 70 percent of U.S. oil company worth is owned by tens of millions of U.S. households through our IRAs, our pensions and our mutual funds.

To a large extent, many of us unwittingly or not are in the oil and gas business.

Inside Energy examined a real retirement account and found out that six percent is directly invested in oil  and gas companies. When you add up the trillions of dollars Americans have invested in retirement accounts, the contribution is significant: The American Petroleum Institute estimates that 70 percent of  the U.S. oil industry is owned by retirement accounts and mutual funds.

Jordan Wirfs-Brock / Inside Energy

Inside Energy examined a real retirement account and found out that six percent is directly invested in oil
and gas companies. When you add up the trillions of dollars Americans have invested in retirement
accounts, the contribution is significant: The American Petroleum Institute estimates that 70 percent of
the U.S. oil industry is owned by retirement accounts and mutual funds.


Inside Energy is a collaborative journalism initiative among public media with roots in Colorado, Wyoming and North Dakota. Contact reporter Dan Boyce at dboyce@insideenergy.org or on Twitter @BoyceDan.

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