Make Money from Rising Gas Prices

Rising gas prices have been caused directly by rising oil prices. Therefor it is possible to offset these higher costs we are all facing by learning to trade in commodities and investing in oil.

Why Invest In Oil?

It is impossible to fail to notice that oil prices have risen dramatically over the last few years. Back in 1990 a barrel of crude oil sold for just under $10. Just a few weeks ago the price broke $140 per barrel. In more recent time the price of a barrel has more than doubled in the last 12 months. What this means to the investor is that because prices are high and continue to rise, there is good money to be made by an intelligent investor.

Why Have Oil Prices Risen So Much?

One of the main reasons cited by commentators is increased demand for oil from the booming economies of China and India. As these economies develop they require huge amounts of oil to fuel the growth in buildings, and manufacturing industries which are huge consumers of oil derived products.

Another reason for the continued high oil prices are the political instabilities that seem to be attracted to countries with large oil reserves. The continuing war in Iraq and the fear over Iran’s nuclear programs as well as the ongoing troubles between Israel and Palestine mean that the oil rich Middle East continues to be a boiling pot of instability. Along a similar vein the Nigeria (Africa’s largest oil producer) continues to have political instabilities.

As news of problems in these volatile areas enters the market they usually cause large price rises. This is because the market fears that they will reduce the future supply of oil. If the supply is reduced, the price will rise because demand (as discussed above) is rising rapidly.

Should I Invest In Oil Stocks?

Well investing in Oil related stocks is one way to gain exposure to the rising oil prices. However the main drawback with this method is that oil stocks are still correlated quite highly with regular stock markets. This means that as the overall stock market moves, they tend to move in the same direction. In today’s climate where the Dow Jones Industrial Index has been falling this means that in general oil stock have been falling to, all be it by a smaller amount.

Where should I invest then?

There are a number of products available that allow you to invest directly into a commoditiy without having to buy it. The following link provides some more detail about how to invest in oil directly.