How To Cash in on the Rising Price of Oil

The price of oil is like the tide--sometimes it is high, at other times it is low.  Changes in oil prices affect everyone, especially consumers of oil-based products.  The effect of fluctuations in oil prices can be either good or bad for the consumer’s wallet.  Oil prices are expected to reach $150 per barrel in 2011 and rise further to twice that cost in 2015.  That’s a big source of uh-oh for someone who just buys oil-based products as a consumer.  But, for someone who invests in oil, that’s a huge opportunity to make a fortune from the rising price of oil.

Anyone can rake in money from oil price changes regardless of whether oil prices are high or low.  All it takes is an adventurous spirit and a friend who can give expert advice on financial investments.  The secret to cashing in on the changing prices of oil is to invest in oil.

One way to invest in oil is to buy shares in oil companies.  A high-net-worth investor can very easily buy futures contracts in oil companies through brokers.  Experienced investors can also invest directly in oil wells without the aid of brokers.  In this area, however, not all investors are equal.  Qualified investors can expect huge potential gains and sizeable tax advantages.  Some potential investors may find this route impractical, though.  Is there another way?

Another simple way to invest in oil—a more practical one—is to invest in exchange-traded funds (ETF), which cost less, are tax-efficient, and work just like stocks.  ETFs often track the oil price.  The ability to monitor the oil prices will allow the investor to make wise decisions on how to bet.  The ETS WTI 1-Year (OSW1), for example, allows shorter-term bets, while the ETFS WTI 3-Year (OSW3) allows longer-term bets in oil price trends.  One might consider investing in U.S. Oil.  It makes direct investments in futures contracts but trades them like stocks.  Another fund to consider might be the new U.S. 12-Month Oil, which is reported to iron out difficulties that ETFs encounter when buying higher-priced futures and selling them at lower prices.

A third way is to invest in are mutual funds.  Vanguard Energy Fund and the T. Rowe Price New Era fund are examples of mutual funds that one can invest in.  Mutual funds companies pool money from investors and invest the money, on behalf of the investors, in securities such as stocks, bonds, and other short-term money market instruments.  The net proceeds or losses are spread out to the fund investors every year.  Mutual funds, therefore, are less risky investments.

There are still other ways to cash in on the rising cost of oil, but the three ways discussed above are the most common.  Whatever route one decides to go, consulting with a financial adviser is always a good idea, especially if one is still unfamiliar with financial investments.  One does not need to remain a victim of the rising or falling of oil price—one can actually ride the waves and earn a fortune whether the tide is high or low by investing in oil.


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