Take advantage of rock bottom oil prices
"As others have alluded to but haven't said due to the lack of reputation points to spare, you can take advantage of oil prices by leveraging up and using as much credit and margin as the banks and brokerages (respectively) will lend you. People assume that the correct answer on this forum has to masquerade as conservative financial advice, and this is not advice nor conservative. Futures contracts are readily available, but they are expensive to obtain (like a minimum entry of $4,450). But if this expense is no such object to you then you can then obtain this contract which is actually worth 20x that and experience the price appreciation and depreciation of the whole contract. The concept is similar to a downpayment on a mortgage. You assume ""rock bottom"" oil prices, but fortunately for you, futures contracts will allow you to quickly change your bets from future price appreciation and allow you to speculate on future price depreciation. So although the union workers will be protesting full time after the drilling company lays them off, you will still be getting wealthier. Long Options. These are the best. The difference with options, amongst other speculation products, is that options require the least amount of capital risk for the greatest reward. With futures, or with trading shares of an ETF (especially on margin), you have to put up a lot of capital, and if the market does not go your desired direction, then will lose a lot. And on margin products you can lose more than you put in. Being long options does not come with these dilemmas. A long march 2015 call option on USO ETF can currently be bought for less than $200 of actual cash (ie. the trading quote will be less than $2.00, but this will cost you less than $200), and will be worth $1000 on a very modest rebound in prices. The most you can lose is the $200 for the contract. Compared to $4450 on the futures, or $100,000 (that you don't have) in the futures market if oil really moves against you, or compared to whatever large amount of cash needed to actually buy shares of an ETF needed to make any decent return. These are the most lucrative (and fun and exhilarating and ) ways to take advantage of rock bottom oil prices, as an individual." Probably the easiest way for individual investors is oil ETFs.  In particular, USO seems to be fairly liquid and available.  You should check carefully the bid/ask spreads in this volatile time.  There are other oil ETFs and leveraged and inverse oil ETFs exist as well, but one should heed the warnings about leveraged ETFs. Oil futures are another possibility though they can be more complicated and tough to access for an individual investor.  Note that futures have a drift associated with them as well.  Be careful close or roll any positions before delivery, of course, unless you have a need for a bunch of actual barrels of oil. Finally, you can consider investing in commodities ETFs or Energy stocks or stock ETFs that are strongly related to the price of oil.  As Keshlam mentions, care is advised in all these methods.  Many people thought oil reached its bottom a few weeks back then OPEC decided to do nothing and the price dropped even further. A long call options spread. In this case, a bet that the USO ETF would recover to $35. You can see, I got in when USO was $28, and it's continued to drop, but it has till Jan '17 to recover. The spread is set up to give leverage, when I entered the trade, a 50% recovery would result in a 200% gain, or 3X my bet. An option spread can be bought using any two strikes, and with different payouts depending on how far out of the money the strikes are. "I'm really surprised more people didn't recommend UGA or USO specifically.  These have been mentioned in the past on a myriad of sites as ways to hedge against rising prices.  I'm sure they would work quite well as an investment opportunity.  They are ETF's that invest in nearby futures and constantly roll the position to the next delivery date.  This creates a higher than usual expense ratio, I believe, but it could still be a good investment.  However, be forewarned that they make you a ""partner"" by buying the stock so it can mildly complicate your tax return." I would suggest that oil stocks are going down due to reduced earnings predictions.  The market may go too far in selling off oil and oil-related stocks.  You may be able to pick up a bargain, but beware that prices may continue to fall in the short to medium term.
I understand I am being a tad simplistic.  But we can all pull a Wikipedia article out of our ass can't we? https://en.wikipedia.org/wiki/1973_oil_crisis  Similar price increase ($3 --&gt; $12). But lets just compare the effects by looking at the length of the article and not the content. I concede I am again be a tad simplistic. But the oil shortage nearly escalated into a full blown war, crashed the stock market, and all these other implications. I think that supports my original argument to OPs question, dont you think u/raybrignsx? Thanks to the lack of the KeystoneXL pipeline, the WTI price has been artificially depressed. However world prices of refined product haven't - they are set relative to the global price of oil. Thus someone can make a tidy profit by refining, then shipping product.  It's no surprise that there have been shortages of distillate in places like North Dakota - the product goes where the money is.  BTW, in essence it means if US customers won't pay world prices, they won't get the product - putting a floor under the prices you'll pay. If past is prologue, I'd say $20, give or take, inflation adjusted of course. http://www.antagoniste.net/WP-Uploads/2007/01/oil_prices_1861_2006.jpg If supplies are at nightmare oversupply, say, as an absurd unlikely scenario, 82 year high in US oil supplies or an all time record in EIA weekly inventories, it looks like the oil price could be capped at the cost of oil sands:  This one's just plain scary.  Unless if there were some changes refinery laws or technology that I'm not aware of, refineries cutting 50% of the retail gasoline volumes looks bad: "Ok, I think what you're really asking is ""how can I benefit from a collapse in the price of gold?""  :-) And that's easy. (The hard part's making that kind of call with money on the line...) The ETF GLD is entirely physical gold sitting in a bank vault. In New York, I believe. You could simply sell it short.  Alternatively, you could buy a put option on it. Even more risky, you could sell a (naked) call option on it. i.e. you receive the option premium up front, and if it expires worthless you keep the money. Of course, if gold goes up, you're on the hook. (Don't do this.)   (the ""Don't do this"" was added by Chris W. Rea. I agree that selling naked options is best avoided, but I'm not going to tell you what to do. What I should have done was make clear that your potential losses are unlimited when selling naked calls. For example, if you sold a single GLD naked call, and gold went to shoot to $1,000,000/oz, you'd be on the hook for around $10,000,000. An unrealistic example, perhaps, but one that's worth pondering to grasp the risk you'd be exposing yourself to with selling naked calls. -- Patches) Alternative ETFs that work the same, holding physical gold, are IAU and SGOL. With those the gold is stored in London and Switzerland, respectively, if I remember right.  Gold peaked around $1900 and is now back down to the $1500s. So, is the run over, and it's all downhill from here? Or is it a simple retracement, gathering strength to push past $2000? I have no idea.  And I make no recommendations." Well i'm not saying it will be terrible, i could have said this wrong but it might be terrible. Dollar is not the international currency just in oil but mostly everything. Different countries uses dollar to trade, this is one of the core reasons of US economy being the strongest. US should not be tolerant about this sort of stuff since if this trend continuous it could be disastrous. "Option 1 is out. There are no ""safe returns"" that make much money. Besides, if a correction does come along how will you know when to invest? There is no signal that says when the bottom is reached, and you emotions could keep you from acting. Option 2 (dollar cost averaging) is prudent and comforting. There are always some bargains about. You could start with an energy ETF or a few ""big oil"" company stocks right now." Maybe not, but I think the point ElBrad was making is that you chart a pretty tight relation to price hikes by barrel and price increases at the pump over time.   Price drops by barrel aren't usually followed by a drop at the pump though, as it takes a while for competition to drive that down.   So while it's good news that oil prices are dropping per barrel (for non gasoline uses), it's fair to be totally cynical about the prospect of a cheaper prices at the pump when you hear news like this.  Watching that per barrel rate drop and knowing this means a nice cushy profit trough for Exxon always comes with a slight taste of distain. "Your chance of even correctly recognizing the actual lowest point of a dip are essentially zero, so if you try to time the market, you'll most likely not get the ""buy cheap"" part perfectly right. And as you write yourself, while you wait for the dip, you have an ongoing opportunity cost. Cost averaging is by far the best strategy for non-professional and risk averse investors to deal with this. And yes, over the long run, it's far more important to invest at all than when you do it." This has zero impact on spot prices or anywhere on a reasonably scaled forward curve.  Reddit can be such an echo chamber spouting bullshit sometimes.  Yes, it'll eventually reduce oil use, but it's at least 20 years down the line.  The whole issue with the oil market these days is US tight oil production being able to ramp up quickly and reduce costs. If you have money and may need to access it at any time, you should put it in a savings account.  It won't return much interest, but it will return some and it is easily accessible.   If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds.  These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts.   You should not buy individual stocks unless you have enough money to buy a lot of them in different industries.  Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred.  There's also considerable research effort required to verify that the stocks are good buys.  For most people, this is too much work.  For most people, broad-based index funds are better purchases.  You don't have as much upside, but you also are much less likely to find yourself holding worthless paper.   If you do buy stocks, look for ones where you know something about them.  For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing.  But do your research, so that you don't get caught buying after everyone else has already overbid the price.  The time to buy is right before everyone else notices how great they are, not after.   Some people benefit from joining investment clubs with others with similar incomes and goals.  That way you can share some of the research duties.  Also, you can get other opinions before buying, which can restrain risky impulse buys.   Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors.  Only make the move into individual stocks if you're willing to be serious about it.  There's considerable work involved.  And don't forget diversification.  You want to have stocks that benefit regardless of what the overall economy does.  Some stocks should benefit from lower oil prices while others benefit from higher prices.  You want to have both types so as not to be caught flat-footed when prices move.   There are much more experienced people trying to guess market directions.  If your strategy relies on outperforming them, it has a high chance of failure.  Index-based mutual funds allow you to share the diversification burden with others.  Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be.  Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions.  I.e. stocks tend to be good when bonds are weak and vice versa. By coincidence, I entered this position today. Ignore the stock itself, I am not recommending a particular stock, just looking at a strategy. The covered call.  For this stock trading at $7.47, I am able, by selling an in-the-money call to be out of pocket $5.87/sh, and am obliged to let it go for $7.00 a year from now. A 19% return as long as the stock doesn't drop more than 6% over that time. The chart below shows maximum profit, and my loss starts if the stock trades 21% below current price.  The risk is shifted a bit, but in return, I give up potential higher gains. The guy that paid $1.60 could triple his money if the stocks goes to $12, for example. In a flat market, this strategy can provide relatively high returns compared to holding only stocks. I think that's unreasonable. If you had read the article and clicked on the Amory Lovins link you would have seen this - an article in which he talks about there being more oil in Detroit than Saudi Arabia.  Energy + Genius The Saudi Arabia Beneath Detroit Amory Lovins, 10.09.08, 06:00 PM EDT Radical efficiency can decouple us from oil for far less than making more. As BobbyScon said in the comments, invest in a company that is developing in that field. Or invest in a company which supplies that field. The people who got rich in the California gold rush were those selling shovels and other miners' supplies. Or bet against whatever you think this will displace. If automobiles are the hot new thing, it might be a bad time to invest in harness leather. Or ... figure out how else it might impact the economy and invest appropriately. But you have to do that evaluation yourself. Or ignore it and stick with your existing strategy, which should have been diversified enough to deliver reasonable results whether this sector takes off or not. Remember that if someone gives you a free tip, they are probably just hoping to pump up the value of their own stock rather than help you. "This is the best tl;dr I could make, [original](http://www.reuters.com/article/us-markets-oil/oil-ends-on-a-low-after-halving-in-2014-as-opec-stands-aside-idUSKBN0K905620141231) reduced by 76%. (I'm a bot) ***** &gt; NEW YORK - Oil prices fell on Wednesday to a 5-1/2-year low and ended with their second-biggest annual decline ever, down by half since June under pressure from a global glut of crude.  &gt; Weekly U.S. data showed crude oil stockpiles fell more than expected, but inventories at the oil hub at Cushing, Oklahoma, grew, keeping prices depressed.  &gt; Oil prices have collapsed this year as the Organization of the Petroleum Exporting Countries opted to maintain the same level of output despite a global glut caused by expanding U.S. shale output and diminished demand growth from China.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/759rn2/the_triggering_factor_for_the_oil_price_drop_in/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~224918 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **Oil**^#1 **Price**^#2 **U.S.**^#3 **crude**^#4 **low**^#5" "No. That return on equity number is a target that the regulators consider when approving price hikes. If PG&E tried to get a 20% RoE, the regulator would deny the request. Utilities are basically compelled to accept price regulation in return for a  monopoly on utility business in a geographic area. There are obviously no guarantees that a utility will make money, but these good utilities are good stable investments that generally speaking will not make you rich, but appreciate nicely over time. Due to deregulation, however, they are a more complex investment than they once were. Basically, the utility builds and maintains a bunch of physical infrastructure, buys fuel and turns it into electricity. So they have fixed costs, regulated pricing, market-driven costs for fuel, and market-driven demand for electricity.  Also consider that the marginal cost of adding capacity to the electric grid is incredibly high, so uneven demand growth or economic disruption in the utility service area can hurt the firms return on equity (and thus the stock price). Compare the stock performance of HE (the Hawaiian electric utlity) to ED (Consolidated Edison, the NYC utility) to SO (Southern Companies, the utility for much of the South). You can see that the severe impact of the recession on HE really damaged the stock -- location matters. Buying strategy is key as well -- during bad market conditions, money flows into these stocks (which are considered to be low-risk ""defensive"" investments) and inflates the price. You don't want to buy utilities at a peak... you need to dollar-cost average a position over a period of years and hold it. Focus on the high quality utilities or quality local utilities if you understand your local market. Look at Southern Co, Progress Energy, Duke Energy or American Electric Power as high-quality benchmarks to compare with other utilities."