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Oils Well That Ends Well Revisited

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With rising gas prices making daily headlines ($4.50 a gallon for me Northern California), I thought I'd revisit an article from the past: Oils Well That Ends Well. The article about our investments was written at the end of November, 2008.

I made a point that we had been picking up shares of Vanguard Total Index (VTI) and Vanguard All-World Ex-US (VEU) since the Dow Jones was around 8200. That's looks good in hindsight, however, that wasn't the point of the article.

The article made the point that oil at $65 seemed like a tremendous bargain compared to the $150 oil that was the norm a few months before. I invested in oil via PowerShares DB Oil Fund (DBO). However, with rumors of oil going to $30 a barrel at the time, I was concerned it wasn't the smartest decision.

I ended the article with the idea that even if oil did get $30 a barrel, "I can't help but feel that at some point in the next 3 or 4 years we'll see $100 oil again." It's now 3 and half years later and I read that on Friday that oil passed $125 a barrel.

So I should be doing the Dance of Joy, right? Not so much.

I signed into my Zecco account for the first time quite a long time to count my millions. Turns out that they weren't there. I had bought in at $26.71 with the stock off its highs of around $55. With the price of oil getting near its peaks that had DBO trading at $55, I thought the stock would be back there. On Friday DBO closed at $31.88. That's a gain of around just 20%, where I was hoping to see a 70% gain.

I'm not sure where things went wrong. Perhaps there's not enough investors speculating on oil yet. One side of me says that with the stock up sharply, it might be time to lock in some gains. The other side of me says that it will only continue to go up like gas prices this summer.

In either case, I'm still a big fan of buying oil stocks on dips. It definitely helps with the shock at the pump.

Last updated on February 26, 2012.

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