Experienced traders have seen this movie before. When oil prices surge, clean and renewable energy equities often follow suit.
Due to the war in Iran, crude prices are indeed surging, trading around $100 per barrel with concern those prices will go higher. Broadly speaking, renewable energy stocks and ETFs are living up to the just mentioned precedent. Indeed, the ALPS Clean Energy ETF (ACES ) is up 3.50% over the past month, extending its year-to-date to 6.66%.
Why do elevated oil prices have a tendency to boost clean energy stocks? It’s a matter of simple economics. Expensive oil highlights the economic advantages of renewables, such as wind and solar— both heavily represented in ACES.
“It’s been a key motivation behind the story around renewables for some time,” noted Ulrik Fugmann of BNP Paribas. “Put very simply, the cost, and certainly prolonged cost, of a fossil fuel shock far outweighs the investments needed to continue to build out renewables. And hence the best form of energy security is to onshore and internalise your energy system.”
Regional Implications Abound
All of ACES’ holdings are U.S. or Canadian companies, but some are exporters, indicating those firms are levered to renewable energy adoption trends at the regional level. Europe is a prime example of a rapid adopter of clean energy, a trend hastened in part by Russia’s invasion of Ukraine in 2022, which prompted some European Union nations to speed up their embrace of renewables.
“Within European energy policy, what we’ve seen are two extraordinary things,” added Fugmann. “The first one is the European Commission pushing for revisiting nuclear [energy] across Europe and that comes in the face of Germany and Italy saying that they now want to reopen some of their nuclear plants.”
Here in the U.S., there are political implications for ACES and rival ETFs. Fugmann pointed to some Republicans starting to come around on clean energy and the possibility of the Democrats taking one or both houses of Congress in the 2026 midterms as potential catalysts for the renewable energy industry.
“The elections could be a real shot in the arm for U.S. power markets and renewables,” he noted. “If we have a Democratic House or Senate, there will be a revisiting of these wind and solar tax credits, if the Republicans don’t front-run that and actually try and reinstate that before even the midterms. And that clearly is unbelievably supportive for clean energy in the US.”
The point is it’s not all about high prices for ACES, though that scenario does provide some near-term assistance.
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