Oil Consumption. ETF provider PowerShares hosted a webcast yesterday with BP Capital Management Founder and Chairman T. Boone Pickens, who had some interesting points to make about the commodity:
- Since 1970, our dependence on imported oil has shot up from 24% to nearly 70%
- The world oil consumption on a daily basis is 85 million barrels; 21 million of that is the United States (but we’re only 4% of the world’s population)
- The United States has other resources at its disposal – particularly, wind
If we don’t change our habits soon, the price spikes in oil that we’ve witnessed in the past will almost certainly return to haunt us.
Spotty Forecasts. Paul Amery over at Index Universe wonders if the question of whether oil ETF investors know what they’re doing is a fair one to ask. He notes that Goldman’s oil forecasting skills haven’t been spot on lately – the predicted $200 a barrel last May. However, they also called $100 a barrel a few years ago, so make of that what you will.
Amery also notes that exchange traded product investors were gathering short oil positions just ahead of the peak; now they’re switching back to buying.
Investors Are Smart. We have to agree with Amery – today’s investors are smart, educated and careful in their research. Thanks to the internet, the transparency of ETFs and the overall accessibility of necessary information, the majority of investors are arming themselves with knowledge before getting into the markets.
The best way to protect yourself is with both an entry and an exit strategy. Have it ready at all times.
- United States 12 Month Oil (USL): down 4.9% year-to-date, up 0.3% in the last month. This fund approaches futures by buying the near-month contract and rolling it over into the next month as each contract expires. Investments are spread out over 12 months of contracts, bought in equal amounts.