As refinery stocks have surged throughout 2026, investors seeking energy exposure may find a more stable opportunity in an overlooked corner of the market: midstream energy infrastructure companies.
In a market discussion on investing in an inflationary environment, Schwab Network guest Paul Baiocchi, head of fund sales and strategy at SS&C ALPS Advisors, discussed why midstream energy infrastructure offers a compelling long-term opportunity compared to refiners.
Key Takeaways
- Midstream revenues depend on throughput volume rather than the volatile crack spreads that determine refiner profitability.
- Long-haul liquids interstate pipelines regulated by the Federal Energy Regulatory Commission (FERC) feature annual inflation adjustments built into long-term contracts.
- U.S. liquefied natural gas (LNG) exports are projected to surge by 50% by 2030. Meanwhile, domestic natural gas already generates roughly 42% of U.S. electricity.
Fee-Based Stability Distinguishes Midstream From Refiners
Midstream energy infrastructure companies own pipelines that transport natural gas and crude oil from production sites to end destinations. Baiocchi noted that midstream is a distinct, fee-based business model, and companies are not beholden to commodity price spreads. Instead, revenues are based on volume.
Regarding inflation, Baiocchi highlighted that long-haul liquids pipelines regulated by the Federal Energy Regulatory Commission (FERC) have inflation escalators embedded in their contracts, providing inflation protection for their revenue streams.
Geopolitical Realignment & U.S. LNG Export Tailwinds
Addressing global supply dynamics, Baiocchi said after the start of the conflict in Iran, global energy markets will never be the same. Even if the conflict with Iran resolves, he expects countries will actively seek to stockpile energy and commodity resources and circumvent strategic maritime chokepoints like the Strait of Hormuz and the Bab al-Mandeb Strait.
Countries historically dependent on those chokepoints will seek new supply sources for crude oil and natural gas. The U.S. possesses significant supply and export capacity with room to spare. That’s driving a global reconfiguration of commodity markets that benefits U.S. producers. Meanwhile, it insulates the domestic market from Middle Eastern disruptions, Baiocchi said.
Across the domestic energy spectrum, Baiocchi pointed out that natural gas accounts for roughly 42% of U.S. electricity generation. With an abundant supply of natural gas, U.S. liquefied natural gas (LNG) exports are projected to expand by another 50% by the end of the decade, expanding the U.S. global footprint.
Baiocchi concluded that energy infrastructure represents an attractive long-term investment. It enables investors to capitalize on rising domestic electricity demand, the essential role of natural gas, and expanding global export markets for LNG as well as natural gas liquids (NGLs) such as ethane, propane, and butane.
See more: How Midstream/MLPs Diversify Equity & Income Portfolios
For more news, information, and analysis, visit the Energy Infrastructure Content Hub.
