Chevron's CEO Is Warning of a 1970s-Style Oil Crisis. These 3 Energy Stocks Could Surge Before Summer.

On May 4, at the Milken Institute's Global Conference, Chevron (NYSE: CVX) CEO Mike Wirth laid out the argument that the Strait of Hormuz's closure, coupled with the resultant impact on global crude oil inventory and strategic reserves, point to a strong chance of an oil shortage, akin to the oil supply shocks of the 1970s.

Only time will tell whether Wirth's forecast pans out, but this possible headwind could mean an investing opportunity may be opening up.

U.S.-based downstream and midstream energy companies stand to benefit from falling overseas supply, which is good news for the following energy stocks: ConocoPhillips (NYSE: COP), Energy Transfer (NYSE: ET), and Occidental Petroleum (NYSE: OXY).

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ConocoPhillips stands far from the crisis zone

ConocoPhillips has a substantial production presence in the United States. It has much of its production portfolio in oil-rich regions of the country, like Alaska's Prudhoe Bay, the Bakken region of North Dakota and Montana, and in West Texas's Delaware and Midland Basins.

Better yet, ConocoPhillips' international production locations are far from the current Mideast conflict. Hence, if oil and gas prices soar due to supply shocks, ConocoPhillips will benefit greatly, as it can sell into the increased demand.

Trading for 12 times forward earnings, in line with other oil production stocks, the shares could rally if underlying commodity prices keep climbing. Windfall profits could allow ConocoPhillips to up its quarterly dividend, not to mention increase share repurchase plans. At current prices, this blue chip stock in the energy sector has a forward dividend yield of 2.85%.

A midstream demand boost would bode well for Energy Transfer

As a master limited partnership (MLP), Energy Transfer pays out 90% of its pre-tax earnings in the form of distributions to unit holders. This requirement means Energy Transfer, like most other MLP-style pipeline stocks, has a relatively high forward dividend yield.

Currently, Energy Transfer's forward dividend yield is 6.75%. Energy Transfer has a spotty track record of growing distributions. Namely, during the COVID pandemic, the MLP reduced payouts. However, given the current oil price boom, distribution growth, not contraction, is far more likely.

Energy Transfer recently raised its quarterly cash distribution by more than 3%. Before the Strait of Hormuz crisis, Energy Transfer was targeting annual distribution growth in the 3%-5% range. Now that the crisis could boost demand for U.S. oil exports, this MLP could exceed expectations in the near term.

Occidental is another likely U.S. production winner

Occidental Petroleum shares have rallied 38% year to date amid the supply shock-driven surge in crude oil prices. However, if the supply shock persists, the stock could add substantially to these gains.

During outgoing CEO Vicki Hollub's tenure, Occidental vastly expanded its U.S. production reserves, namely via the 2019 acquisition of Anadarko Petroleum . As a result, Occidental owns substantial low-cost reserves in the Permian Basin.

If there's another 1970s-style oil shortage and prices surge further, Occidental will likely earn far more than current analyst forecasts, which call for earnings of $5.42 per share this year and $3.67 per share next year.

Even if this oil stock, trading for around 10.5 times forward earnings, maintains its current multiple, greater-than-expected earnings could propel shares toward high-double-digit price levels.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips and Occidental Petroleum. The Motley Fool has a disclosure policy.