You might have noticed that oil and gas prices have been a little unpredictable lately. One day, they’re up on better economic news; the next, they’re down on fears of a still-struggling economy. Up, down, sideways…where are these exchange traded funds (ETFs) going?

Mark Williams for Associated Press reports that if the gasoline prices start to rise, the crude oil prices are to follow. The average nationwide retail price for gasoline hit $2.828 per gallon Monday, an increase of 0.2 cents. And that may not be the end of it, either. [Natural Gas ETFs Poised for Gain?]

Factors that could contribute to higher oil and gas prices include:

  • Summer’s approach. The warm summer months tend to lead to lots of driving and utilization of the more expensive summer gas. [The Benefits of Equity Commodity ETFs.]
  • International trade. Global economies are recovering and with that, we’re seeking a spike in trade levels. This could demand more oil and gas usage.
  • The weak dollar. If the dollar stays weak, it makes oil cheaper for overseas buyers and therefore increases demand. [Plug Into the Copper ETF Rally.]

On the other hand, factors that could push oil and gas prices lower are:

  • We’re just not ready. Price spikes have not come as a result of more demand. Unemployment is still very high and while consumers are spending more, few think that the economy and Americans are equipped to handle $5/gallon gasoline.
  • More drilling. Jesse Jenkins for Forbes also points out that the Obama Administration is supporting  expanded offshore oil and gas extraction. However, while much of the rhetoric used to advocate for offshore drilling deals with the threat of rising prices at the pump and our nation’s energy security, EIA projections say that crude and gasoline prices would not be affected until 2030.

What’ll it be? What do you think? If you’re betting on one direction or another, use a strategy that incorporates a stop loss point to protect yourself when the trend winds down. [How to Follow Trends.]

For more stories about Commodity ETFs, visit our commodity ETF category.

  • United States Oil Fund, LP (NYSEArca: USO)
  • PowerShares Dynamic Energy Exploration and Production (NYSEArca: PXE)
  • iShares Dow Jones U.S. Oil & Gas Exploration & Production (NYSEArca: IEO)
  • United States Gasoline (NYSEArca: UGA)
  • Rydex S&P Equal Weight Energy (NYSEArca: RYE)

Read the disclaimer; Tom Lydon is a member of the board of Rydex|SGI.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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