Petrol prices in Australia are set to rise and hit the wallet of everyday folks, after drones attacked a Saudi Arabian oil processing facility.
Instantly, the whole world lost 5 per cent of its daily supply. This means oil prices will go up and everyday Australians will pay more to commute to work, take their children to school and go grocery shopping.
“Every US dollar per barrel increase in the price of oil is basically a cent at the Australian petrol bowser,” CommSec chief economist Craig James told the ABC.
Already after just one morning’s trade, the Brent crude and West Texas prices had surged 10 per cent and 9 per cent respectively.
But while their neighbours suffer, some Australians make money when petrol prices rise.
Commodity trading – selling and buying physical goods like oil, steel, coffee – is conventionally the domain of wealthy folk or investment banks.
But Stake operations manager Sarhang Shafiq told Yahoo Finance that exchange-traded funds have made this investment practice accessible to Average Joe.
“There are some investors out there feeding off the movement in petrol and oil prices.”
How to invest in oil and petrol
Exchange-traded funds (ETFs) are already a popular form of share investment that tracks the average performance of a specific sector or market.
The investor buys shares in the ETF, and when that market or sector’s value rises, so do those shares.
And these days there are ETFs that track the value of commodities – including crude oil.
“For example, United States Oil Fund gives you access to the spot price of West Texas Intermediate (WTI) light, sweet crude oil,” said Shafiq.
“The ETF invests in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges.”
So if you hold shares in that fund, the value will go up when oil prices ascend. The investor makes money while others pay more at the petrol station.
Unfortunately commodity ETFs are rare in the Australian market – there is just one oil ETF on the ASX. So Australians likely need to buy US shares to be able to invest properly in crude oil.
“In the US there are more than hundreds of oil ETFs or stocks that are impacted by the price of oil and similar commodities,” Shafiq said.
How to invest in US oil ETFs
A US trading account will allow an Australian investor access to purchase American oil ETF shares.
But how does an Australian get a US trading account? Some conventional stockbrokers will allow this, but the transaction fees can be high.
But there are startups that are making foreign financial activity easier. Stake, for example, allows Australians to buy and sell US stocks for no brokerage fees.
The company earns its revenue by charging 70 US cents per AU$100 moved in and out of the trading account.
“If you anticipate oil prices to increase then buying an oil ETF gives you that exposure. It can also be used as a way to hedge an increasing oil price and its impact on your car costs!” said Shafiq.
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