Is there any way to invest in gas?

[KTP]

Is there any direct way to invest in gasoline? I am 99% sure that the price of gas will go up by 10% or more this summer. I don't know of anywhere else I could get a 99% sure 10% return. I have never invested in futures, but is that how it is done? Investing in refiners or raw crude producers doesn't quite seem to track the market correctly. Sometimes when oil prices and gas prices go up, shares in refiners actually goes down. I understand somewhat that this is due to the "crack spread" and existing inventories, but I don't have a great grasp of how things work.

Basically, I want to buy an option to purchase x gallons of gasoline for y dollars, then sell that option for z dollars in june or july, where hopefully z > y.

[tripods68]

If you don't have a good grasp about futures, the basic things to look at are oil companies (like exxon or bp) and natural gas producing companies (aapl). Their stock prices are highly correlated with oil futures. Just my two cents.

[KTP]

I did invest in Exxon last year, along with Valero. Not large investments, but they are down with the rest of the market.

I guess what I am thinking about is an investment vehicle like gold. Most of those who invest in gold don't actually take delivery and store the bars at home under the sink (if so, please shoot me an email where you live), but rather they buy shares in a holding company or similar, correct?

I want to do the same thing with gas. Treat it like gold, and buy gasoline in volume now at current prices and sell it higher during the summer, without actually ever taking delivery of said gasoline.

This doesn't really seem to fit either Exxon (producer) or Valero (refiner).

In my ideal world, there would be zero risk of losing your investment because gasoline is not going to drop to zero.

In the case of options, I could see how you would lose your entire investment, but that is the same thing as buying an option on a stock.

I guess it is futures I would need to seriously research if I decided to devote part of my higher risk portfolio to this. (although my definition of what is risky is getting skewed nowadays since my S&P500 index stocks have dropped so much).

[sweeps]

UGA .

[MiikeB]

You should consider that a 10% increase in cost of consumer gas will rarely ever mean a 10% increase in the stock. Gas always goes up in the summer, and a large portion of this increase is already "priced in" to the share value.

[Scanner]

If you want oil exposure, consider

USO

or

DXO

DXO has a high expense ratio though.

[kork13]

Sure. Buy a barrel or five of gasoline. When prices go up, sell it to your neighbors, undercutting the local stations by enough to draw people in, but still ensuring a nice profit. ^_^

[KTP]

heh, I wasn't thinking of going to the extreme of selling gas out of a barrel to friends

Everyone knows gas goes higher in the summer. I just thought there might be a way to cash in on this fact while only taking on medium risk (of a collapse in oil prices like last September). Do you have to do this with gold? Buy the bars or coins of gold now and then sell them to your neighbors when you need cash? I don't think gold works like that...

[sweeps]

USO

or

DXO

These will give you exposure to oil but not to gasoline. For a while oil was going down while U.S. gasoline was going up. I reiterate UGA if OP really wants direct exposure to gasoline.

[cooliemae]

Here's a link to a story by ABC news concerning a "gas bank".

Buy now, store the gas at the bank, then come fill up when you need to.

[boosami]

A friend of mine stockpiles gas when it is cheap and fills up with his saved gas when prices are high. He just has a ton of portable gas cans.

[GrimJack]

A friend of mine stockpiles gas when it is cheap and fills up with his saved gas when prices are high. He just has a ton of portable gas cans.

I hope he does not have any close neighbors!

[cptacek]

We signed a contract with our local coop to get 1200 gallons of diesel between April 1 and July 31 for a set amount. I think you can get something similar for gas.

[rizzmo]

In order to trade futures on crude oil barrels you will need a large amount of investment capital. This is how it works

A single future contract in crude oil is say $1,000. This means you agree to buy 1000 barrels of crude oil at the current market rate. If current market rate is $55 per barrel, your brokerage firm will require you to have $55,000 in an account with them to cover your liability on the future purchase.

Here is an example of how it works. Say you have 65k in cash deposited in a brokerage account and you decide you want to buy a single future in crude oil. A single future contract legally binds you to purchase 1,000 barrels of crude oil in the future (hence the name futures) at the current market rate, the day the contract is purchased. The cost of the contract itself is $1,000 and it is a 3 month future. Now let us say the current market rate is $55/barrel. This means you need to have $55,000 in cash deposited in your brokerage to be sure you can make good on the contract you purchased for 1,000 barrels of crude. So you started with 65k minus 1k for the contract, so you have 64k in cash. Of this 64k in cash there is a hold on 55k to cover you contracts liability. So you have 9k left open cash. At this point two things can happen crude can either rise or fall in price.

If crude rises to say $65/barrel you sell the contract and make the spread. Here is the math $65/barrel x 1,000 = $65k - $55k = $10k profit – 1k for the contract fee = $9k profit on a $1k investment … not too shabby.

If crude falls to say $50/barrel an additional $5k in your brokerage account will be held. However, crude recovers and goes to $70/barrel … lucky you … and make a nice profit of 14k on a 1k investment.

Now here is why playing with futures can be risky. Let us say that we bought our contract at the end of the trading session yesterday at our $55/barrel. This morning, OPEC releases a statement that they will significantly be increasing production in crude. The market opens with crude falling to $30k/barrel. This means you need to have 85k deposited in order to meet your obligation. Now you can’t take possession of the crude, because you don’t have legal facilities or logistics available to accept crude oil. Additionally, you have to make good on this legal contract to both purchase and take possession of 1,000 barrels of crude. You now need 85k to cover your new liability (55k + 30k amount you will now lose to sell the contact at market value). Since you don’t have that in your account the brokerage firm is bound by law to immediately liquidate your contact. This results in an 85k loss which wipes out your 64k (I believe you will still be on the hook for the additional 21k). 5 days later crude jumps to 85/barrel as news of war in the middle east drives prices up. The upside, the guy who bought you contract is signing it the streets.

I would only play in futures if you can afford to cover the entire loss potential … in this example 110k. This is why most people don't trade futures.

[GREENBACK]

A friend of mine stockpiles gas when it is cheap and fills up with his saved gas when prices are high. He just has a ton of portable gas cans.

I have to wonder if there is a law on how much gasoline a private individual can store at a residence. I have to believe there's some regulation or something that limits this. I know there are laws on how much gunpowder(flammable propellant) one can possess at home. I'd think a flammable combustible substance like gasoline would have some regulation but, then again, who knows.

Your neighbor could end up with a really nice bonfire if he isn't careful