Don't Expect Prices Drop Until 2027: 2 Stocks to Buy for This Exact Scenario

Hook: Why the next few years could surprise you (in a good way for investors)

Oil markets rarely move in a straight line, but there are powerful forces that can keep prices elevated longer than many prognosticators expect. A geopolitical reality in the Middle East, coupled with supply constraints and disciplined spending by major producers, has led some industry observers to suggest that energy markets won't fully normalize for years. If you don't expect prices drop anytime soon, you owe it to your portfolio to consider how to position yourself for that scenario. This article outlines why you might think don't expect prices drop, and then explains two compelling stock ideas that could thrive under a higher-for-longer oil environment.

Don’t Expect Prices Drop: the logic behind a longer-than-expected energy cycle

Several structural factors have the potential to keep energy prices higher for longer than many forecasts anticipated. Global demand still rebalances after shocks, spare production capacity remains tighter than in the past, and capital discipline among top oil firms means less aggressive drilling in downturns. When supply remains constrained relative to demand, even modest demand growth can keep prices elevated. If you don't expect prices drop in the near term, you’re likely thinking about how to ride the higher-for-longer tide rather than betting on a swift return to pre-crisis pricing.

From an investor’s lens, that means prioritizing companies with:

• Strong cash generation across cycles
• Balanced capital returns—dividends and buybacks in addition to growth projects
• Conservative balance sheets and hedging programs that protect margins
• Operational efficiency and a clear plan to return capital to shareholders

Two stocks that align with a higher-for-longer oil outlook

If you don't expect prices drop, two upstream energy players stand out for their ability to generate steady cash flow, maintain dividend credibility, and deploy capital efficiently. Devon Energy (NYSE: DVN) and Diamondback Energy (NASDAQ: FANG) have built models around returning capital to shareholders while preserving optionality for the future. Here’s why they fit a higher-for-longer narrative—and how to think about using them in a diversified portfolio.

Devon Energy (DVN): cash flow engine with a disciplined approach

Devon Energy has earned a reputation for focusing on high-return oil and gas assets in the United States. In a world where don't expect prices drop, Devon’s strategy emphasizes disciplined capital allocation, strong balance sheet management, and a robust dividend program. The company tends to emphasize free cash flow generation, even with modest price volatility, and uses that cash to reward shareholders while maintaining optionality for growth projects.

• Cash flow resilience: Devon has historically shown the ability to generate meaningful cash flow across price cycles, supported by production efficiency and hedging that protects margins in down cycles.
• Capital return cadence: In recent years, Devon has increased its dividend or supplemented it with share repurchases when cash flow allows, signaling management’s commitment to returning capital to investors.
• Growth optionality: While the focus remains on returns, Devon retains a portfolio of high-potential drilling opportunities that can be scaled up if prices stay elevated longer than expected.

In a market where oil and natural gas stay structurally stronger than many forecasts, Devon’s model can produce more consistent per-share earnings and cash returns than some peers. The key is the ability to weather lower-price environments without compromising the balance sheet or dividend policy.

Diamondback Energy (FANG): efficiency leader with a shareholder-first mindset

Diamondback is known for its efficiency-focused operations, modern asset base, and disciplined capital deployment. In a world where prices don’t collapse, Diamondback’s operational excellence translates into higher margins and stronger FCF. The company also emphasizes cost control, modern drilling techniques, and a scalable production base that can respond quickly to favorable price moves.

• Operational efficiency: Diamondback’s asset base and operating routines have historically delivered strong profitability even when prices are under pressure, making it a compelling core holding in a higher-for-longer scenario.
• Capital discipline: The company tends to prioritize debt reduction and sustainable dividends, with a readiness to reinvest when returns meet or exceed hurdle rates.
• Shareholder focus: Buybacks and dividend optimization are common components of Diamondback’s capital allocation strategy, which helps support total returns over time.

For investors, Diamondback offers a combination of scale, efficiency, and a willingness to reward shareholders through steady cash distributions. In a scenario where prices don’t drop, its margin profile should remain robust and help support continued value creation for investors.

How to structure a portfolio when you don’t expect prices drop

Positioning for a higher-for-longer oil environment doesn’t require abandoning diversification or embracing only a single theme. A thoughtful mix can help you capture upside while reducing risk. Here’s a practical framework you can use to combine the two stocks above with other investments:

• Core exposure: 1–2 high-conviction upstream names like DVN and FANG as the core of your energy sleeve, sized to 3–7% of a typical 60/40 stock/bond portfolio depending on risk tolerance.
• Hedging complement: Consider long-dated energy hedges or energy-infrastructure funds to protect against unexpected volatility while you ride cash flow strength.
• Defensive ballast: Add a steady dividend payer in the utilities or consumer staples space to stabilize downside in broader markets.
• Growth offset: Include a growth-oriented thematic in technology or healthcare that isn’t directly tied to commodity cycles, providing balance against energy concentration.

Remember, don't expect prices drop to become a central thesis for your investment plan only if it’s supported by disciplined stock-picking and a clear risk management approach. It’s not about betting on a perpetual high; it’s about building a portfolio that can lean into persistent strength in energy cash flows while maintaining a prudent safety net.

Potential risks to these ideas

Even when you don't expect prices drop, it’s essential to acknowledge the downside. Key risks include geopolitical shocks that suddenly flood the market with supply, regulatory changes that alter drilling economics, and shifts in demand patterns tied to global economic growth. Here are the main risk vectors to watch:

• Geopolitical volatility: A sudden ceasefire or a diplomatic breakthrough could ease supply fears, pressuring prices lower in the near term.
• Commodity price swings: Oil and gas prices can be highly reactive to OPEC decisions, inventory levels, and macroeconomic surprises.
• Operator risk: The upstream players’ actual production growth and capital allocation decisions may diverge from expectations due to cost overruns or project delays.
• Market sentiment: Even solid cash flow can be overshadowed by broader market drawdowns or sector rotations, impacting stock performance.

To mitigate these risks, use position sizing, diversify across a couple of complementary names, and maintain a cash reserve to seize new opportunities if prices become volatile again.

Putting it into action: a simple, repeatable plan

If your assumption is that energy prices won’t drop quickly and could stay elevated into 2027 or beyond, here is a straightforward plan you can adopt:

1. Define your time horizon: A 5–7 year window aligns well with energy cycles and capital return plans.
2. Set a reasonable risk budget: For many investors, a 3–7% position in the energy sleeve makes sense, with a portion allocated to defensive assets for balance.
3. Choose core positions: DVN and FANG as the central bets, with clear criteria for adding or trimming based on cash flow and debt metrics.
4. Plan for volatility: Use stop-loss rules or a trailing-cash strategy to protect capital during sector-wide drawdowns.
5. Review cadence: Reassess every quarter to align with production updates, capex plans, and macro developments.

Executing a disciplined plan helps you stay the course when headlines scream that energy prices are back down. The reality is that a thoughtful, evidence-based approach can deliver compelling returns even if the broader market fears a protracted cycle.

Conclusion: clarity matters when you don’t expect prices drop

The thesis that oil prices may stay elevated for years is not a guaranteed bet, but it’s a defensible framework for stock selection. By focusing on upstream firms with solid balance sheets, strong cash generation, and shareholder-friendly capital allocation, you can position yourself to thrive in a higher-for-longer energy environment. Devon Energy and Diamondback Energy illustrate two practical ways to implement this approach: they combine operational efficiency with disciplined capital returns and a readiness to grow cash flow when prices permit. If you don’t expect prices drop, this is a case for building a resilient core in your portfolio while maintaining prudent risk controls.

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