BUSINESS NEWS

TUPNews recently had a word with the chaps at Oil Securities, who are launching the first oil-backed exchange-traded fund tomorrow. What this means is that the ordinary punter can now, through his stockbroker, gain exposure to the oil price. The price of crude oil is one of the most “visible” economic indicators out there, appearing in headlines whenever it goes over $50, or now $60, but until now the closest Joe Sixpack could get to it was buying shares in the oil companies themselves, which is not quite the same. But now you can buy an oil security from Oil Securities, which will track the price of a barrel provided by Shell Trading Switzerland. So you don’t actually have to take delivery of the barrel! The minimum investment is just one barrel, which goes for about $58-59, depending on where it’s from – you’ve got a choice of Brent or West Texas Intermediate. WTI is light and sweet, while Brent is also light and sweet, but slightly less light and slightly less sweet than WTI. I’m probably going to get one of each.

Obviously this alone is great fun, but Oil Securities say they are also looking at bringing out similar instruments for the price of gasoline. If these came to the market, motorists could hedge themselves against fluctuations in the price of gasoline by buying the equivalent of their annual consumption of gasoline at the start of the year, and holding it as an asset. As the gasoline price rises, you would pay more at the pump, but there would be more sitting in your portfolio. Risk management power to the people!