What happened

Across the energy sector, from oil and gas majors to contract oil drillers and oil refiners, shares of oil stocks are falling. Illustrative of the fall, as of 1:40 p.m. ET today, oil major ExxonMobil (XOM -0.21%) is down 2.2%, while downstream from Exxon, refiner Phillips 66 (PSX -2.00%) is seeing its shares slide 3.3%. And toward the upstream at contract driller Transocean (RIG 1.68%), the losses are even steeper -- 8.3%.

Falling oil prices are the reason.

So what

As OilPrice.com reports this morning, the price of a barrel of Brent oil fell 2.2% today to about $104.60, while in the U.S., WTI crude is down 3% -- and back below $100 at $96.91, erasing gains from earlier this week and actually pushing the price of oil below where it ended last week.  

There's no obvious, headline-grabbing explanation for the relapse -- rather, just generalized concerns about the prospect of economic weakness in China and a potential recession here in the U.S., making investors wonder if demand for oil is about to take a hit. At the same time, motorists are proving the truth of the old adage that "the cure to high prices is high prices." With gasoline prices retreating from highs near $5, and toward the $4.50 range instead, motorists are nevertheless still upset that gas costs more than twice what it did a couple years ago.  

Result: OilPrice.com reports that "finished motor gasoline demand" last week was 8.52 million barrels per day, down "sharply" from almost 9.45 million barrels a year ago. Simply put, high prices have consumers buying less gas, depressing demand for gas and pushing prices lower in turn.  

Now what

That's the bad news for oil prices, and oil stocks. Now here's the good news (for oil investors): The reasons why gasoline prices are so high -- and why oil prices are high, too -- remain lamentably intact.

Russian troops continue to rampage across Ukraine, and sanctions against Russian oil exports remain in place, with little prospect of their being withdrawn anytime soon. As a result, there's an artificial supply constraint on oil that's actually available to buy in much of the world. Given constant demand (or even slightly less demand, given the China and recessionary factors mentioned above), tight supplies mean high prices. And so, after surveying all the reasons why oil prices slipped a bit today, OilPrice.com analysts nonetheless conclude that "a persistent tight market with limited spare capacity continues to put a floor under falling prices." This means that oil prices, while not quite at all-time highs, will remain quite high.

And this implies that the profits Exxon earned last quarter, for example, mostly before the war began are very likely going to go even higher when Exxon reports its second-quarter earnings on July 29. Indeed, analysts are forecasting a mind-boggling $3.74 per share in profit for Exxon, the most the company has ever earned in a single quarter.  Ever.

With Exxon stock currently selling for just 7.4 times current-year estimated earnings, and paying a 4% dividend yield, now probably isn't a great time to be selling Exxon stock but buying it instead. 

The same is true for Phillips 66 and its estimated $5.78-per-share quarterly profit -- only more so. Never in history has the company earned so much. And if Phillips earns the $13.72 per share projected for it this year, the stock's P/E ratio is a mere 6 times earnings! (With an even beefier 4.5% dividend yield.)  

I wish I could say the same thing for Transocean, which is currently unprofitable and, according to analysts, likely to remain so through 2024 at least (by which time the oil supply crisis will hopefully have abated). But even without Transocean, investors have two fine, deep value oil stocks to choose from in ExxonMobil and Phillips 66.

Don't let them pass you by.