What happened

As winds howl, temperatures drop, and Wall Street prepares to close down for Christmas, energy investors are having a good day on Friday.

WTI crude oil prices have climbed 2.9% through 12:20 a.m. ET and are closing on $80 a barrel, while Brent Crude is up 3.2%, at about $83.50. Responding to the increased value of their stock, shares of U.S. oil majors ExxonMobil (XOM -0.88%), Chevron (CVX -0.87%), and ConocoPhillips (COP 0.01%) are gaining 2.3%, 3%, and 4.2%, respectively.

So what

The question is: How long will these higher oil prices last, and will they last long enough to produce excess profits for Exxon, Chevron, and ConocoPhillips to justify their higher share prices? And that question remains in some doubt.

On the one hand, oil prices have gained about 13% over the past two weeks, which does seem like something of a solid trend higher. On the other hand, today's spike in oil prices in particular appears to owe -- in the opinion of the experts at OilPrice.com at least -- to "concerns about the big freeze forcing production shut-ins," which could depress production and refining of oil in the U.S. temporarily. (That said, cold and snow also have a tendency to suppress travel, and therefore oil demand, for the duration of the current cold snap).  

Not only must investors consider the potential for the one effect of the cold counteracting the other, but according to the National Weather Service, the current cold temperatures bearing down on the U.S. from Canada constitute a "once-in-a-generation" storm. And just to emphasize the obvious, anything that happens only once every few decades isn't something that investors can depend upon to constitute a long-term trend that would keep oil prices heading higher.  

Now what

Long story short, oil buyers -- and investors -- may be overreacting to temporary cold temperatures raising the price of both oil and oil stocks today.

Meanwhile, the big picture looks modestly less propitious for oil investors. In a separate story on OilPrice, they're reporting today that higher interest rates in India -- "a key driver of global energy demand growth" -- are beginning to depress manufacturing output. This implies a drop in oil demand in that country.

The long-term trend for energy demand in India remains positive, says OilPrice, but for the duration of 2023, at least, the outlook is for a "slowdown" in energy demand. Once this week's cold temperatures blow over, I suspect it's this trend that will be more important to oil prices, and oil stocks, over the next 12 months.  

So what's the upshot for investors in oil companies? Good news replaces bad news daily in this industry, and oil remains a cyclical industry, so it's important not to overpay. The good news is that Conoco shares currently sell for only 8.4 times trailing earnings. And even lower expected oil prices (and profits) in 2023 only raise this stock's valuation to about 9x projected 2023 earnings.

Similarly, Exxon costs 8.8 times trailing earnings, and is only a bit more expensive -- 9.5x -- when valued on forward earnings. Even Chevron, the priciest stock of the bunch, sells for a historically modest 9.9 times trailing earnings and 10.9 times forward earnings.

According to data from S&P Global Market Intelligence, it's been nearly a decade (2013) since Chevron stock averaged a valuation this low. Despite all the variables, I think long-term buyers of oil stocks today have a better-than-average chance of earning good profits if they're patient.