Oil is an attractive individual investment for several reasons.
By Daniel at 11 June, 2009, 8:32 pm
I’m using it as a personal hedge against gas prices. I used to cringe when I saw local gas prices go up. Now I know that the extra gas expense will be offset by returns on my USO stock. It’s the same logic as used by the airlines when they hedge their fuel costs, but on the micro level.
Oil is also a great hedge against inflation. Since oil is tied to the dollar, oil’s price will go up as the value of the dollar falls, so it can be useful to diversify some money into oil for safe keeping. Gold is also used as a hedge against inflation, but gold trading much higher than oil right now, so oil feels safer.
Investing in oil is also a good way to force change on the market, without government intervention. For a long time I thought speculation in the oil markets was evil. Then it finally occurred to me that the recent high cost of oil has done more to drive new alternative energy technologies and drive consumers to more fuel efficient vehicles than any government mandate ever could. While it is true that my investment in oil drives up the price, it also drives up the demand for wind power and solar power, which I also invest in. It seems counter-intuitive, but buying oil actually helps make for a greener world. (As long as you buy oil directly, and don’t buy into something like Chevron, where they could be actively undermining alternative energy to protect their oil interests.)
An unfortunate result of higher gas prices is the effect on the poor. But even lower income people have access to alternatives, such as car pooling, mass transit, and even bicycles. I recently started using Phoenix’s new light rail track, and found it was less hassle then trying to navigate and park in the middle of the city (and actually cheaper, too.)
bozz
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