The oil industry is profitable and stable, and the demand for this fossil fuel is growing. The Organisation of Petroleum Exporting Countries (OPEC) provides up to date information on a regular basis, and as the demand for oil has shot up, returns on your investment can be quite high in comparison to other investments. One simple way for the average person to invest in oil is through stocks of oil drilling and service companies.
There are a number of ways an investor can get exposure to oil; the most obvious method is to invest in a company within the oil industry, such as Royal Dutch Shell, Premier Oil, British Petroleum, Dragon Oil or Tullow Oil.
Another route to consider would be using an ETF, or Exchange Traded Commodity (ETC) focused on oil. Exchange traded funds, mirror the performance of a particular index or market and investors can trade them during the day in the same way as ordinary shares but they are free from stamp duty charges, and their popularity is rising fast.
ETFs providers include, dbx-Trackers, Lyxor and iShares, which for example offers ETFS Crude Oil, which tracks the price of Crude. Commodity specialist ETF Securities, offers ETFs as well as variations. It has ETFS Crude Oil, which like the iShares fund, simply tracks the price of crude oil - but there are options on this too, designed for the more adventurous.
For example there are ETFs available that are 'short' or 'leveraged' versions, such as ETFS Leveraged Crude Oil. The latter tracks the fortunes of oil with a 2% leverage - it will beat the price of oil by 2% when it's rising but also fall further by 2% when it is going down. The short version is for bearish investors, who expected the oil price to fall. But if you want to spread your investment across the energy spectrum, and include natural gas, you could opt for the ETFS Energy DJ-AIG which tracks the up and downs of the Dow Jones-AIG Energy Sub-Index (SM).
Most UK funds will have exposure to oil, given that commodities and resources firms now make up around a third of the FTSE index of the UK's top firms. The basic fact is that commodities, and especially oil, are difficult to avoid – it is estimated that the typical UK portfolio has an average of 5% invested in oil and oil related stocks.