How Do I Buy Oil
In 2021, the United States exported about 8.54 million barrels per day (b/d) and imported about 8.47 million b/d of petroleum,1 making the United States an annual total petroleum net exporter for the second year in a row since at least 1949. Total petroleum net exports were about 0.06 million b/d in 2021, and total petroleum net exports in 2020 were 0.63 million b/d. Also in 2021, the United States produced2 about 18.77 million b/d of petroleum and consumed3 about 19.89 million b/d. Even though U.S. annual total petroleum exports were greater than total petroleum imports in 2020 and 2021, the United States still imported some crude oil and petroleum products from other countries to help to supply domestic demand for petroleum and to supply international markets.
how do i buy oil
After generally increasing every year from 1954 through 2005, U.S. gross and net total petroleum imports peaked in 2005. Since 2005, increases in domestic petroleum production and increases in petroleum exports have helped to reduce annual total petroleum net imports. In 2020 and 2021, annual total petroleum net imports were actually negative, the first years since at least 1949.
U.S. petroleum imports rose sharply in the 1970s, especially from members of the Organization of the Petroleum Exporting Countries (OPEC). In 1977, when the United States exported relatively small amounts of petroleum, OPEC nations were the source of 70% of U.S. total petroleum imports and the source of 85% of U.S. crude oil imports.
Since 1977, the percentage shares of U.S. imports of total petroleum and of crude oil from OPEC have generally declined. In 2021, OPEC's share of U.S. total petroleum imports was about 11%, and its share of U.S. crude oil imports was 13%. Saudi Arabia, the largest OPEC petroleum exporter to the United States, was the source of 5% of U.S. total petroleum imports and 6% of U.S. crude oil imports. Saudi Arabia is also the largest source of U.S. petroleum imports from Persian Gulf countries. About 8% of U.S. total petroleum imports and 9% of U.S. crude oil imports were from Persian Gulf countries in 2021.
Petroleum imports from Canada increased significantly since the 1990s, and Canada is now the largest single source of U.S. total petroleum and crude oil imports. In 2021, Canada was the source of 51% of U.S. gross total petroleum imports and 61% of gross crude oil imports.
Because of logistical, regulatory, and quality considerations, exporting some petroleum is the most economical way to meet the market's needs. For example, refiners in the U.S. Gulf Coast region frequently find that it makes economic sense to export some of their gasoline to Mexico rather than shipping it to the U.S. East Coast because lower cost gasoline imports from Europe may be available to the East Coast.
Petroleum liquids include hydrocarbon gas liquids (HGLs). HGLs exports, mainly propane, have increased substantially since 2008, and in 2021, HGLs represented about 27% of total U.S. gross petroleum exports. The top five destinations of U.S. total petroleum exports (including crude oil) by percentage share of U.S. total petroleum exports in 2021 were:Mexico14%
Although EIA cannot identify which companies sell imported gasoline or gasoline refined from imported oil, it does publish data on the companies that import petroleum into the United States. However, the fact that a company imports crude oil does not mean that those imports will be used to produce the gasoline sold to motorists as that company's brand of gasoline. Gasoline from different refineries and import terminals is often combined for shipment by pipeline. Different companies owning service stations in the same area may be purchasing gasoline at the same bulk terminal, which may or may not include imported gasoline or gasoline refined from imported oil.
1 Petroleum is a broadly defined class of liquid hydrocarbon mixtures that include crude oil, lease condensate, unfinished oils, and products produced from refining crude oil and from processing natural gas plant liquids, including hydrocarbon gas liquids. Volumes of finished petroleum products include non-hydrocarbon compounds, such as fuel ethanol, biodiesel, additives, and detergents, that are blended into the products.
Crude oil trades on the New York Mercantile Exchange as light sweet crude oil futures contracts, as well as other commodities exchanges around the world. Futures contracts are agreements to deliver a quantity of a commodity at a fixed price and date in the future.
Oil options are another way to buy oil. Options contracts give the buyer or seller the option to trade oil on a future date. If you choose to buy futures or options directly in oil, you will need to trade them on a commodities exchange.
There are also a few more advanced ways to invest in this global commodity And, depending on your investing goals and risk tolerance, some options might be superior to others. Here's what you need to know if you're looking to get started with oil investing.
Oil is one of the most important driving forces of the economy. It enables shipping and transportation. It powers factories and, most likely, your car. Oil companies will continue to remain near the top of the list of the most valuable businesses in the world, even when oil prices falter over concerns about the impact of political events or pandemics.
It's effortless to buy the stock of an oil or gas company using a brokerage account. Because these and other big oil companies trade on the major stock exchanges, you can buy and sell shares with no transaction fees. To do that, you need an account with one of the popular brokerages such as Ally Invest or TD AmeritradeThis is one of the more straightforward ways to invest in oil. But there are several other options at your disposal.
Exchange-traded funds (ETFs) and mutual funds allow you to buy a basket of investments in one purchase. There are many funds to choose from in this arena. Some give you exposure to a set of stocks or oil and gas commodities. But others focus on particular regions or types of oil.
Again, pretty much any online broker will let you trade various ETFs without paying commissions. And there are plenty of great brokers for mutual funds that have many no-transaction-fee (NTF) funds to choose from.
Just note that while stocks are going up and down with the company's performance and expected results, commodities are generally considered riskier than stocks. When you read that oil prices are going up or down, the oil commodities are what they are talking about.
If you want to invest in oil with little money, your brokerage account is probably the best place to look. With the new advent of no-fee stock trades at big brokerage houses, you can buy shares of stock without worrying about fees cutting into your investment.
Expert and professional investors often look to options and futures to earn a profit in the commodities markets, among others. And since crude oil is obviously a massive commodity, you can also invest in oil by trading options and futures.
However, if you don't know much about options or futures, make sure to sit down and study before diving in. This type of investment is extremely risky if you don't know what you're doing. Even if you do, there's a good chance you'll lose money trading options and futures, so be fully aware of the risks when going in.
And pricing crashes can happen. Take 2020, for example, when U.S. oil prices briefly went negative. Many investors lost a lot of money in this period, particularly those trading futures on the losing side.
And just like investing in oil ETFs or mutual funds, starting with options or futures is straightforward. Most brokerage firms dropped the base fee for options trades in 2019, but you'll still pay around 50 to 75 cents per contract. Some investment apps like Robinhood offer commission-free options, and Interactive Brokers is also an excellent broker. As for futures contracts, they typically cost around $1 to $2 each.
Again this isn't for people wanting to know how to invest in oil with little money. It's best for people who have significant assets. You should invest only what you can afford to lose if things don't work out as expected.
MLPs are best for investors looking to earn cash flow from their investments. They're not as volatile as commodities in many cases. But they have some unique tax reporting rules, and don't usually appreciate all that much. This makes them more of a niche investment than regular oil stocks.
In January 2016, oil and gas prices and stocks looked to be at a low point. After a quick chat, my wife and I decided it was a good time to buy into oil and gas. We chose to do so through a semi-diversified purchase of three stocks.
We purchased shares of Chevron (CVX), Conoco Phillips (COP), and ExxonMobil ( XOM) and still hold them in our joint portfolio. Since we first invested in these companies, we've received a trickle of cash flow from the stocks' dividends. If you add up the performance of all three stocks, we have a nice little gain in our portfolio.
But over the last few years, we've seen massive shifts in the price of oil. The coronavirus outbreak brought global air travel to a halt and closed businesses. But currently, the Russia-Ukraine war has sent oil prices skyrocketing worldwide.
If anything, this price volatility highlights the potential risks and rewards of investing in oil. If you time it right, it can be an incredibly lucrative commodity. But it's also so important that global events can have a massive, unforeseen impact on prices and your investment.
Investors who want to make a difference in their investments and are concerned about the climate risks posed by fossil fuels might not want to invest in oil companies. In fact, some large funds, such as public pension funds, are divesting from fossil fuels. The University of California, for example, removed all fossil fuel investments from its $126 billion investment portfolio in 2020. Many investors moving away from fossil fuels cited the concern over climate change and the environmental issues of oil drilling, such as oil spills and waste. 041b061a72