What is an Energy Sector?

James Doehring

The energy sector is a term that typically refers to the oil and gas industry. Depending on the standard used for categorizing companies, it can also include the production and distribution of other fuels and equipment. It generally also includes businesses related to the exploration, marketing and distribution of petroleum products. For the purpose of categorizing industries, energy-sector companies can be distinguished from those of electricity production, which are usually organized in a separate utilities sector. Unlike electricity, the end products of businesses in the energy sector are often used as mobile sources of energy.

An offshore oil platform. The energy sector is primarily focused on the oil and gas industry.
An offshore oil platform. The energy sector is primarily focused on the oil and gas industry.

There are two main industry classification standards in use today. The Global Industry Classification Standard (GICS) was created by the finance companies Morgan Stanley Capital International and Standard and Poor’s. The GICS provides a structure in which major public companies can be categorized into 10 sectors. The second standard in use, the Industry Classification Benchmark (ICB), was developed by Dow Jones and FTSE group. The ICB categorizes companies into 10 main groups based on source of revenue.

Wind power is a clean energy source.
Wind power is a clean energy source.

Both standards have an energy sector as one of the 10 groups. The energy sector is primarily focused on the oil and gas industry, which includes businesses dominated by construction of oil rigs and drilling equipment as well as the exploration, marketing, refining and transportation of petroleum products. In both standards, these products and services are typically oriented towards producing fuels for mobile vehicles and equipment rather than the production of electricity. The GICS, however, does include the production of coal in the energy sector.

Except for the acquisition of fuel, the two standards categorize electricity production under a utilities sector. Electricity is a source of energy that typically requires consumers to be stationary to use it. Nevertheless, it is widely used in developed countries for both personal and industrial applications. In countries like the United States and China, the burning of coal—a non-renewable resource—is the main source of electrical power. In France, however, nuclear power accounts for nearly 80% of electricity production.

There are some businesses included in the GICS and ICB that are not strictly oil and gas businesses. The standards put seismic data collection services in the energy sector because of their role in oil and gas exploration and production. Additionally, the ICB includes many companies that manufacture renewable energy products under the energy sector. These can be equipment for solar, hydro, geothermal and wind power plants. They can also be alternative fuels like ethanol and methanol.

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