Before today’s article: Robert identifies three fuel-heavy businesses he would avoid if oil holds above $100 — but his own portfolio points in the opposite direction. For more than 30 years he has covered the essential-service companies that supply energy rather than consume it, and says the current pricing environment is one of the more compelling setups he has seen for that group. See the companies Robert holds for this energy environment →

Oil has moved back above $100 a barrel as the conflict involving Iran continues to disrupt global energy supplies. Brent crude finished last week at $104.61 a barrel, while West Texas Intermediate closed at $100.05. Both benchmarks gained more than 8% for the week, and the latest attacks on Saudi energy infrastructure have created another source of uncertainty for a market already struggling with reduced flows through the Strait of Hormuz.

For energy producers, higher oil prices can translate directly into higher revenue and cash flow. But there is another side to the trade. Companies that consume large quantities of fuel can see expenses rise much faster than they can raise prices, particularly when the increase happens quickly. Airlines and cruise operators are obvious examples, and the latest earnings reports show that this is no longer a hypothetical problem.

That doesn’t mean every company exposed to fuel prices should automatically be sold. Some businesses have hedges in place, strong pricing power, or enough margin to absorb higher costs. But if oil remains above $100—or moves materially higher—there are several stocks where the risk/reward looks increasingly unattractive.

Here are three I would avoid for now.

American Airlines Group

American Airlines Group Inc. (NSDQ: AAL) may have the clearest exposure of the three because it currently has no fuel hedges in place. In its latest quarterly filing, American stated that it had no outstanding fuel-hedging contracts as of June 30 and that, under its current policy, it expects to remain fully exposed to changes in fuel prices. That matters considerably in the present environment.

We can already see the impact in the numbers. During the second quarter, American spent $4.9 billion on aircraft fuel and related taxes, up $2.2 billion, or 83%, from the same quarter a year earlier. The average fuel price jumped to $4.05 per gallon from $2.29. Strong demand and higher fares allowed American to offset nearly half of that fuel headwind, but there are limits to how much of a cost increase an airline can pass through to passengers.

The effect has also shown up in the company’s outlook. American reduced its full-year adjusted earnings guidance to a range of a $0.65 loss to a $0.65 profit per share, citing the recent increase in fuel costs. That guidance was based on a forward fuel curve from July, before the latest run that pushed crude back above $100. The company has been generating record revenue, so this is not fundamentally a weak business. But when record revenue is being offset by billions of dollars in additional fuel expense, the vulnerability is obvious.

American could perform well if oil retreats sharply, because lower jet-fuel prices would provide immediate relief. But that cuts both ways. With no meaningful hedge protection, the stock is one of the more direct ways for investors to be exposed to the wrong side of another oil-price spike.

Southwest Airlines

Southwest Airlines Co. (NYSE: LUV) presents an especially interesting case because it was once famous for using fuel hedges to protect itself from oil-price shocks. That strategy helped Southwest outperform competitors during previous periods of sharply rising energy costs. But the company discontinued its fuel-hedging program in 2025 and terminated the remaining contracts that had been scheduled to run through 2027. Management cited the rising cost of maintaining those hedges and other considerations.

The timing has proved painful. Southwest reported that its second-quarter fuel expense rose by $889 million from a year earlier, producing a $1.17 per-share headwind to adjusted earnings. Fuel cost $3.92 per gallon during the quarter, and the increase came despite strong operating results. Southwest reported record revenue, expanded its adjusted operating margin, and still produced a solid profit, which demonstrates that the business has handled the shock better than some competitors.

But investors should not overlook how large that fuel hit was. Southwest reduced its full-year adjusted earnings guidance to $3.25 to $4.25 per share from its previous expectation of at least $4.00. Its recent commercial changes, including assigned seating, premium products, and other revenue initiatives, have created additional ways to offset cost inflation. Even so, another sustained increase in jet-fuel prices would force those improvements to work increasingly hard just to overcome the energy bill.

I would not call Southwest a broken company, and in fact its underlying operating momentum appears stronger than American’s. But the old assumption that Southwest is uniquely protected from fuel-price shocks is no longer valid. Investors evaluating the stock today need to recognize that an important historical advantage has disappeared.

Norwegian Cruise Line Holdings

The third company provides some diversification away from airlines while preserving the same basic theme. Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) operates Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises. Running a fleet of large cruise ships is an energy-intensive business and rising fuel prices have become increasingly visible in Norwegian’s cost structure.

Fuel accounted for 13.8% of Norwegian’s cruise operating expenses in the second quarter, up from 10.8% a year earlier. Unlike American and Southwest, Norwegian does have substantial hedging protection. As of June 30, it had hedged about 52% of its remaining 2026 projected fuel purchases and 38% of 2027 requirements. That protection clearly helps, but it also means a significant portion of future fuel consumption remains exposed to market prices.

Norwegian estimates that a 10% increase in its weighted-average fuel price would add $39.7 million to expected 2026 fuel expense, although the increase in the value of its fuel hedges would offset approximately $18.5 million of that amount. Those figures show why hedging matters, but they also show that it cannot completely eliminate the impact of higher energy prices.

Cruise lines also face a second potential problem that airlines share to some degree. A prolonged energy shock does more than raise fuel costs. Higher gasoline prices, airline fares, and other inflationary pressures can squeeze household discretionary income. A cruise vacation is exactly the kind of purchase some consumers can postpone if their budgets become tighter. That combination of higher operating costs and potentially weaker discretionary spending is not one I want to own if oil prices continue climbing.

The Big Picture

All three of these companies can withstand high oil prices for a period of time. American and Southwest have demonstrated considerable ability to raise revenue, while Norwegian has meaningful fuel hedges in place. The issue is not whether $100 oil immediately makes these companies unprofitable. It is whether their risk increases materially if today’s energy environment persists.

For me, the answer is yes. American has essentially no fuel-hedging protection, Southwest abandoned the hedging strategy that once distinguished it from competitors, and Norwegian remains exposed to both higher fuel expenses and the potential impact of energy inflation on discretionary travel spending.

Oil prices could certainly fall if geopolitical tensions ease or disrupted supplies return to the market. If that happens, these companies could benefit quickly. But until there is greater clarity, I would rather own businesses that benefit from higher energy prices—or at least companies that are relatively insulated from them—than those forced to absorb billions of dollars in additional fuel costs.

With oil above $100 and the Middle East supply situation still highly uncertain, American Airlines, Southwest Airlines, and Norwegian Cruise Line are three stocks I would avoid for now.

What I’ve described above is the wrong side of higher energy prices. My own work in Utility Forecaster focuses on the right side — the utilities, grid operators, and pipeline companies whose cash flows tend to expand when energy prices climb, not contract. These are the essential-service businesses that supply power and fuel to every airline, every cruise ship, and every data center in the country, and they generate that income whether energy demand comes from AI servers or kerosene-fueled turbines. I have covered this group through every energy cycle of the last 30-plus years, and the structural repricing now underway — driven by the first real surge in U.S. electricity demand in two decades — strikes me as one of the more durable setups I have seen for income investors. See the full Utility Forecaster portfolio and the stocks I am buying in this environment →