Energy ETFs - The Conspiracy Behind Oil Prices
Talk about a broken record; “Oil prices hit new highs”! How often did we have to put up with this headline in the past weeks and months? Too often!
Analysts expect $5/gallon gas by this summer. For us here in
San Diego, along with above average weather we get to “enjoy” above average gas prices. One gallon premium, at the gas station down the road, is $4.99 (compared to the national average of $4.03 for regular). $5 gas, we’ll get to see if for sure.
The price of oil has doubled in the past year (iPath DJ AIG Energy - Ticker: JJE - up 51.89% YTD; PowerShares DB Energy – Ticker: DBA – up 82.93% 1-year), prompting some investors to call it a bubble, but even a 20% or 30% pullback in prices would only lessen - not eliminate - the pricing pressure.
Obviously Wall Street is worried that the high cost of energy, which affects almost all other costs, is going to prove too much for the already strapped
U.S. consumer.
Explosive growth in emerging countries like
China and
India along with some sort of political unrest in, or close to an oil producing country are the usual explanations for higher oil prices.
Here is something new: The commodity Futures Trading Commission (CFTC, the federal agency that regulates trading in commodities like oil) last week disclosed that it is pursuing over 50 possible investigations of oil price manipulation.
Some contend that large oil related investments by hedge funds, pension funds and sovereign wealth funds (foreign-owned investment vehicles) are distorting prices.
Bonds, the preferred investment vehicle of pension and endowment funds, have recalibrated lower after so many rate reductions and have become unattractive. Since bonds don’t even keep pace with inflation, pension and endowment fund managers, by law, are required to seek and find better returns.
Oil trading markets are relatively small, and when new buyers arrive on the scene, the influx of new money can drive prices higher. The popularity of commodity based oil ETFs has also brought new buyers en masse. The prices of commodities like oil, grains and metals tend to rise during inflationary periods thus making them an attractive alternative, drawing billions of dollars.
Regardless, oil industry executives insist that the rise of oil prices is simply the result of rising demand, a weak dollar and of course constraint supplies. But according to some sources the current oil supply levels are good, so other driving forces might be in play. But what are they?
Supplies really might not be as low as made believe; otherwise the
U.S. wouldn’t have added 32.3 million barrels to its oil reserve since January.
Refiners did quietly announce earlier in May that they are cutting back their production, thus artificially limiting supplies. The so-called limited supply does serve a purpose (lower inventories > higher prices > higher profits).
Unfortunately lower gas prices are not in everyone’s best interest, and while there are a number of companies that can be blamed for their selfish business strategies more at fault is the Federal Reserve for aggressively lowering interest rates creating a domino effect which is noticed at the gas-pump and will soon carry over to many other goods.
For those who want to ad some of that precious “black gold” to their portfolio, below is a comprehensive list of oil related ETFs.
Oil Commodity ETFs:
|
Name
|
Ticker
|
Exp.
|
Holdings
|
|
iPath GSCI Crude Oil
|
OIL
|
0.75%
|
100% Oil (sweet, light, crude)
|
|
PowerShares DB Oil Fund
|
DBO
|
0.50%
|
100% Oil (sweet, light, crude)
|
|
United States Oil Fund
|
USO
|
0.50%
|
100% Oil (sweet, light, crude)
|
|
Unites States 12-Month Oil Fund
|
USL
|
0.60%
|
100% Oil (12 futures contracts)
|
|
United States Gasoline Fund
|
UGA
|
0.60%
|
100% Gasoline
|
|
United States Heating Oil Fund
|
UHN
|
0.60%
|
100% Heating Oil
|
|
ELEMENTS
Rogers Int. Energy
|
RJN
|
0.75%
|
47% Crude Oil, 31% Brent Oil, 7% Gasoline
|
|
PowerShares DB Energy Fund
|
DBE
|
0.50%
|
22.5% each: Brent Crude, Light Crude, Heating Oil, Gasoline, 10% Natural Gas
|
|
iPath DJ-AIG Energy ETN
|
JJE
|
0.75%
|
41% Natural Gas, 37% Crude Oil, 11% Heating Oil, 10% Gasoline
|
Broad Based Commodity ETFs:
|
Name
|
Ticker
|
Exp.
|
Holdings
|
|
iPath S&P GSCI Total Return
|
GSP
|
0.75%
|
53% Oil, 7% Gas. 5% Heating Oil, 5% Gasoline
|
|
iShares S&P GSCI Commodity
|
GSG
|
0.75%
|
53% Oil, 7% Gas. 5% Heating Oil, 5% Gasoline
|
|
PowerShares DB Commodity
|
DBC
|
0.75%
|
Oil 35%, Heating Oil 20%
|
|
iPath DJ-AIG Commodity
|
DJP
|
0.75%
|
13% Oil, 12% Gas, 3% Heating Oil
|
Oil Sector ETFs:
|
Name
|
Ticker
|
Exp.
|
|
Energy Select Sector SPDRs
|
XLE
|
0.23%
|
|
First Trust Energy AlphaDEX
|
FXN
|
0.70%
|
|
iShares DJ U.S. Energy Sector
|
IYE
|
0.74%
|
|
iShares DJ U.S. Oil & Gas Expl. & Prod.
|
IEO
|
0.48%
|
|
iShares S&P Global Energy Sector
|
IXC
|
0.48%
|
|
iShares S&P NA Natural Resources
|
IGE
|
0.48%
|
|
PowerShares Dynamic Energy Sector
|
PXI
|
0.60%
|
|
PowerShares Energy Expl. & Prod
|
PXE
|
0.60%
|
|
PowerShares FTSE RAFI Energy Sector
|
PRFE
|
0.60%
|
|
PowerShares Oil & Gas Services
|
PXJ
|
0.60%
|
|
Rydex S&P Equal Weight Energy
|
RYE
|
0.50%
|
|
SPDRs S&P Oil & Gas Equipment & Services
|
XES
|
0.35%
|
|
SPDRs S&P Oil & Gas Exploration & Production
|
XOP
|
0.35%
|
|
Vanguard Energy ETF
|
VDE
|
0.22%
|
|
WisdomTree International Energy Sector
|
DKA
|
0.58%
|
|
Oil Services HOLDRS
|
OIH
|
n/a
|
Short Oil ETFs:
|
Name
|
Ticker
|
Exp.
|
|
ProShares UltraShort Oil & Gas
|
DUG
|
0.95%
|
|
PowerShares DB Crude Oil Double Short ETN
|
DTO
|
0.75%
|
|
PowerShares DB Crude Oil Short ETN
|
SZO
|
0.75%
|
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