How To Profit From Rising Gasoline Prices

As gasoline prices continue to rise, Americans across the country have been feeling some major pain at the pump, shelling out anywhere from $3.52 to $4.57 per gallon just to fill up their tanks. The recent surge in prices have both foreign and domestic roots: overseas tensions coupled with U.S. fears of a shortage of refining capacity have pushed this essential commodity to painfully high levels [see also 25 Ways To Invest In Natural Gas].

Perhaps one of the most significant factors impacting gasoline prices has been the widespread revolutions plaguing Africa and the Middle East. Many powerful producers from these regions halted crude production this past year, sending prices soaring to $115/barrel. After a quick reprieve, tensions once again flared up when Iran, one of the superpowers of crude, threatened to close the Strait of Hormuz, a crucial body of water through which nearly 40% of the world’s oil passes. In response, the U.S. imposed sanctions against Iranian oil, which translated to higher crude oil prices, cringe-worthy gasoline bills, and ultimately a significant dent in many Americans’ wallets [see also Natural Gas ETPs Head-To-Head: GASZ vs. UNG].

Although the situation may seem quite grim, several opportunities emerge for investors wishing to capitalize on the recent surge in gasoline prices. It should also be noted that gas prices tend to rise in the summer months, so the near-term future looks juicy. While there are plenty of option for investing in crude oil, investing in gasoline can be difficult, as the options are spread thin. Below, we outline several ways to make a play on gasoline to help you profit from soaring prices.

  • RBOB Gasoline Futures (RB): Although not as liquid as crude oil, this futures contract provides investors with the most direct exposure to the commodity since it invests in RBOB gasoline, which is simply the gas you get at the pump.
  • WTI Futures (CL): Due to its low sulfur content, WTI Crude Oil is often processed into gasoline on the American east coast and is then piped across the country for consumption.  It is important to note, however, that investments in WTI futures are indirect ones since its price does not always perfectly correlate to fluctuations in gasoline.
  • United States Gasoline Fund (UGA): This ETF invests in near month RBOB futures, rolling exposure as expiration approaches. Investors should be advised that UGA does not seek to replicate movements in the spot price of gasoline, but rather to deliver returns available through a futures-based strategy.
  • Exxon Mobil (XOM): This powerhouse oil company is one of the largest in the world in terms of market capitalization. Exxon Mobil along with stocks of other major oil companies, including BP, Shell, and ConocoPhillips, will generally see their stock prices appreciate when gasoline prices rise.

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Disclosure: No positions at time of writing.

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