New or old energy: Have oil producers bested ASX lithium shares?

Which has been the better investment in the last year? We take a look.

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Key points

  • ASX energy shares have benefited from the rise in oil and lithium prices over the past year
  • Lithium explorer Liontown Resources has posted the biggest gain among oil and lithium shares during that time
  • Coming in bottom of the ladder is oil and gas giant Santos

It’s been a good year for commodities in general with prices reaching all-time highs. Both ASX lithium shares and oil producers have benefited from the prevailing supply and demand dynamics, making investors wealthy in the process.

Oddly enough, both commodities could be considered in competition with each other: oil being the old energy, and lithium the new. However, recent events have demonstrated there can be room for both to perform.

But which segment of energising ASX shares has outdone the other in the past 12 months?

Compare the pair

First of all, it can be difficult to compare entire segments of the stock market with each other. The timeframe and the sample of companies being weighed against each other can be manipulated to show different findings.

So, it’s important to note that this comparison looks at the performance over the last year with a handful of the largest lithium and oil companies.

A little hypothesis to start with… the performance of companies operating in commodities tends to be linked to the price of the underlying commodity itself. Based on this, we could assume the companies that have likely performed the best are the ones with the better performing commodity.

According to Trading Economics, the price of crude oil is up approximately 78% year on year, now hovering around US$110 per barrel. This is a substantial one-year price increase for crude oil.

However, the increase in the price of oil looks paltry compared to the approximate 410% increase in lithium carbonate prices. The expectation of future demand outstripping supply for the electric battery commodity led to an explosion in the lithium price.

But, how does this comparison play out in terms of ASX lithium and oil shares?

TradingView Chart

As shown in the chart above, both new and old energy shares have performed well in the last year. The least impressive return on our list is oil and gas giant Santos Ltd (ASX: STO). Whereas, the home run of the bunch is lithium explorer Liontown Resources Limited (ASX: LTR).

Are ASX lithium shares the victors?

The referenced chart indicates the top three best performers for the last 12 months are lithium shares. These are Liontown Resources, Pilbara Minerals Ltd (ASX: PLS), and Allkem Ltd (ASX: AKE). Impressively, all three delivered returns in excess of 100%.

Comparatively, oil producers such as Woodside Petroleum Limited (ASX: WPL) and Beach Energy Ltd (ASX: BPT) only conjured up gains of 33% and 28% respectively.

It is worth noting that many of the superior performing ASX lithium shares came off a lower base. In other words, it is easier to grow 100% when the company’s market capitalisation is $2 billion instead of $20 billion.

Nonetheless, it looks like lithium shares were the better bet for investors over the last year.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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