Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Which ETF for Gasoline?
Old 03-08-2009, 01:02 PM   #1
Full time employment: Posting here.
Join Date: Aug 2005
Location: Far NW 'burbs of Chicago
Posts: 718
Which ETF for Gasoline?

In previous months we've discussed the idea of buying an ETF to profit or protect from rising gas prices in the future. Even if economic activity and the stock market stay down, oil seems likely to rise in coming years because of the current reduction in exploration.

In the past, oil company or other industry stocks have been a proxy for actual oil. But the current administration is likely to be really tough on them, I could easily see oil prices doubling while profits stay flat or even decline.

I've got two questions:

1. Which ETF to use? USO seems most popular and folks here have bought it, but the contango problem seems to mean you'll lose money if the price stays flat or rises only a moderate amount. USL seems to avoid most of that problem, and then there's UGA and DBO. Which one do you recommend and why?
2. My investments are all IRAs at Vanguard, how would I buy one of these ETFs through them and keep it in the IRA?
Gearhead Jim is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-09-2009, 09:09 AM   #2
Full time employment: Posting here.
Join Date: Aug 2005
Location: Far NW 'burbs of Chicago
Posts: 718
35 views and no replies
Gearhead Jim is offline   Reply With Quote
Old 03-09-2009, 09:12 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Originally Posted by Gearhead Jim View Post
35 views and no replies
It isn't an easy question. Someone may give you ananswer. That doesn't mean that it is the right answer.

Lots of wrong answers available; right ones are harder.

"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 03-09-2009, 09:22 AM   #4
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 48,321
OK, if you insist...

My first advice would be to find some other game of chance and avoid any oil price related investment. But if you can't resist, I'd recommend USL as the lesser of the evils since, as you pointed out, it avoids much of the contango problem that burned me and other USO investors.

Vanguard will allow you to purchase a stock, MF, or ETF in your IRA through their brokerage service. Look for "Brokerage Account" under the "Account Types & Services" tab on their website.
Numbers is hard

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 03-09-2009, 10:23 AM   #5
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
Join Date: Aug 2006
Posts: 2,433
For a disussion of contango, I would draw your attention to a thread we had back on Feb 11, in particular my post #8.

Over the past three weeks, the oil futures contango has begun to flatten. Consequently, since my Feb 11 post above, USO has outperformed USL by 10%.

Closing prices Feb 11

USO 26.08
USL 28.64

Closing prices Mar 6

USO 27.99
USL 27.85

Returns Feb 11 - Mar 6

USO + 7.3%
USL - 2.8%

Ex market impact issues, the relative performance of these two ETFs is driven by the change in slope of the futures curve and not by a mechanical investment strategy.
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 03-09-2009, 12:15 PM   #6
Recycles dryer sheets
Culture's Avatar
Join Date: Apr 2007
Posts: 491
I understand that your OP indicates you disagree with this approach, but I recently moved 2.5% of my portfolio to XOP (SPDR S&P Oil and Gas Exploration and Production ETF). I am convinced that within my investment horizon of 5-10 years, oil is going to become very expensive. Remember, producers usually have more potential upside (as well as downside ) than the commodity itself.

For the same reason, I loaded up (2.5%) on Marker Vectors Gold Miners ETF (GDX) when prices collapsed last October (currently up 60-70%) rather than gold itself (up about 25%). I plan on selling at least half of the GX when it appears the economy has bottomed out (6 months to 5 years perhaps).
Culture is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Gasoline Futures, Anyone? Gearhead Jim FIRE and Money 5 11-23-2008 08:18 PM
$7/gal gasoline Midpack Other topics 35 07-01-2008 06:22 PM
What makes up the price of gasoline? two4theroad Other topics 16 05-30-2008 07:18 AM
Anticipated gasoline price Sam FIRE and Money 69 11-12-2007 02:36 PM
New ETF: Sudan-Free social ETF Olav23 FIRE and Money 2 06-28-2007 09:03 AM

» Quick Links

All times are GMT -6. The time now is 12:34 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.