Fuel Prices And ETFs Look Different In Second Half Of Year
By Tom Lydon on August 12, 2008 | More Posts By Tom Lydon | Author's Website
Exchange traded funds (ETFs) that consistently found themselves at the head of the class with double-digit returns in the first half of the year are suddenly having a different view of things as fuel prices continue their descent.
The price of gas has dropped for 25 consecutive days, and the average for a gallon on Friday was $3.85, reports the Associated Press. The cheapest gas can be had in Tulsa, Okla., where a gallon costs $3.50. Anchorage, Alaska, has the priciest, at $4.37. Prices are still $1 more than they were a year ago, says CNN Money.
In early trading Monday, oil is near the $115 mark. That’s despite the increasing hostilities between Russia and Georgia in the Caucasus region, which is a key transit route for oil and gas from the Caspian, reports Alistair Sharp for Reuters. Since July 11, oil has lost 21% of its value.
Natural gas isn’t immune, either, as futures have fallen 9.2% in just two weeks, says Ben Casselman for the Wall Street Journal. Production of the fuel is way up at 8% this year, and the growth is expected to continue in line with demand, which is up 5.5% this year through May.
Some analysts are talking about a “gas glut,” which in the short term could lead to lower heating and cooling bills. But the effect could be temporary, because if natural gas closes below $8 per million BTU, production will be scaled back - thus sending prices back up again.
ETFs that could continue to be affected by the drop-off in fuel prices include:
- iPath DJ-AIG Natural Gas Total Return Sub Index (GAZ), up 6.9% year-to-date
- PowerShares DB Oil Fund (DBO), up 25% year-to-date
- United States Natural Gas (UNG), up 7% year-to-date
- United States Gasoline (UGA), up 6.4% since April 18 inception

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