Energy companies face a defining structural reality: a large share of their revenue is directly tied to global commodity prices — oil and natural gas — that no single company controls, set instead by broad global supply and demand forces. This is a fundamentally different situation from most sectors, where a company has more direct control over its own pricing. Energy companies split broadly into "upstream" (exploration and production — finding and extracting oil and gas) and "downstream" (refining and distribution — turning crude oil into usable products and getting them to consumers), each with distinct economics.
"Breakeven cost" — the commodity price a producer needs to cover its costs — is a key comparative metric among upstream producers specifically: a lower breakeven cost gives a company more cushion to remain profitable even during a commodity price downturn, while a higher breakeven cost producer can quickly become unprofitable if prices fall. Downstream refiners work differently: their profitability often depends more on the "crack spread" (the price difference between crude oil input and refined product output) than on the absolute level of crude prices, meaning a refiner can sometimes benefit even during a period of falling crude prices, if that spread widens.
Correct moves you up, wrong moves you down — reach 100 to master this lesson.