Table of Contents
Oil is valuable, and one of the most widely used and widely traded commodities in the world. Despite the growth of many forms of alternative energy, oil remains essential to the functioning of industry and transportation around the globe.
Given all the factors that go into oil prices, it’s no wonder that they can fluctuate dramatically, often on a daily basis. The price of oil has an impact on a wide range of industries, and ultimately on the prices that consumers pay at the pump, in the supermarket, and beyond. That also makes it attractive to some investors.
Key Points
• Investing in oil remains attractive to some investors due to its critical role in global industry and transportation, despite the rise of alternative energy sources.
• Various investment options exist, including oil company stocks, mutual funds, ETFs, and exchange-traded notes that track oil prices directly.
• Market dynamics, including OPEC decisions, global supply and demand fluctuations, and production costs, heavily influence oil prices.
• Natural disasters and geopolitical tensions can lead to significant price changes, affecting both supply and investor sentiment in the oil sector.
• Oil investment carries inherent risks due to its volatility, making thorough research and consideration of individual investment goals essential before proceeding.
Ways to Invest in Oil
For those who are interested in incorporating crude oil investing in their portfolio, there are many ways to get started.
Oil Company Stocks
In addition to the massive global names, there are other companies that specialize in different aspects of energy production, oil exploration, drilling, equipment, delivery and more. There are also smaller oil companies with vertical operations, but only in specific parts of the world. Each of those types of companies will perform differently depending on the many geopolitical, economic, technological, and other factors that drive the price of oil up and down.
Recommended: Investing in the Energy Sector: What Any Investor Should Know
Oil Funds
Not every investor has the time or interest to research a host of oil companies. For those investors, another approach might be investing in a mutual fund or exchange-traded fund (ETF) that focuses on the oil sector, or more broadly on the energy sector.
Since thematic ETFs and mutual funds hold many securities, they offer investors a level of diversification within their portfolio.
Recommended: Key Differences between Mutual Funds and ETFs
Exchange-Traded Notes (ETNs)
Exchange-traded notes are a vehicle that invests directly in oil futures contracts. They may be attractive to some investors because they offer easy access to oil futures, without some of the other factors that can affect the performance of oil companies, such as currency fluctuations and swings in the equity markets. Because they buy oil futures directly, ETNs can offer investors a more direct investment in the price of oil.
Derivatives
More sophisticated investors may also consider investing in the derivatives markets, buying futures, and options. Crude oil options trade on the New York Mercantile Exchange (NYMEX) and on the ICE exchange.
Alternative Investments
Investors interested in alternative investments might get exposure to oil by purchasing mineral rights or buying into Limited Partnerships (LPs) that invest throughout the sector.
💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.
Trends in Oil Investing
Oil prices plummeted in 2020, as pandemic-associated lockdowns drove U.S. oil prices into negative territory for the first time in history. In April 2020, investors bid the price for West Texas Intermediate (WTI) from $18 per barrel, down to roughly negative $37 a barrel.
Later that year, oil prices began to normalize. Demand returned in 2021, and oil prices shot back up in 2022, when they reached levels not seen in decades. Then, in 2023, prices did fall a bit again, and remain around $66 per barrel as of mid-2025 — but the point is that prices are always on the move. Given the unpredictability of the global economy, too, it’s very difficult to determine how oil prices will perform going forward.
Forces That Drive Oil Prices
There are many factors that determine oil prices. That, in turn, can affect prices for gasoline and more. Here are some of the forces at play.
The Organization of Petroleum Exporting Countries (OPEC)
Another important contributor to oil prices is the Organization of Petroleum Exporting Countries (OPEC), a group of 12 oil-producing countries, including Algeria, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela.
Together, they’re responsible for nearly 80% of the planet’s oil reserves. As an organization, OPEC meets regularly to set production levels. And its decisions can directly change the price of oil and gas. And while it has a massive influence on the price of oil, it doesn’t control the price.
Market Fundamentals
The global oil market is a force in its own right, as supply and demand tend to fluctuate sharply and unpredictably. There can be too much supply. Within OPEC, members don’t always follow through on the limits they agreed upon limits. There are also major oil suppliers, such as the United States, who are not OPEC members who may produce more oil than expected. That can cause high levels of supply relative to demand, which can drive down prices.
Production Costs
Oil in Canada’s oil sands or American shale reserves is far more labor-intensive and expensive to extract and refine than the oil in the Middle East. Those extraction costs contribute to the price of the oil, which can drive the oil prices higher or lower, depending on where the bulk of supply is coming from at any given time.
Natural Disasters
Oil prices are also susceptible to change as a result of natural disasters. Hurricanes, for example, regularly shut down oil production in the Gulf of Mexico, which can reduce the supply of oil and drive prices up.
International Relations
The headlines, especially international ones, can also drive oil prices. A significant amount of the world’s oil comes from the Middle East. Political instability in that region creates investor uncertainty, which can lead to price fluctuation. The same goes for countries like Russia, which produces a lot of oil, but is often involved in geopolitical conflicts.
Economic Factors
While not always the case, recessions and economic turmoil can push oil prices lower.
The relative strength of the U.S. dollar also plays a role in the price of oil. The thinking is that a strong dollar allows American oil companies to buy more oil, and cut the cost to U.S. consumers, who buy a good percentage of the oil on the market.
However, while oil does not typically perform well during a recession, it does typically become more attractive to investors later in the business cycle.
The Takeaway
Oil is always in demand, and fluctuates a lot in price, which may make it attractive to many investors. But it’s a volatile investment, which can make investing in oil a risky endeavor. Given that many people are focused on renewable energy sources, too, investing in oil may not be as attractive as it once was.
The volatility of oil and its importance to the global economy makes it an important asset class for many investors. But again, it’s risky — so, whether you decide to invest in oil or oil-adjacent sectors and companies should be given considerable thought.
Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.
Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.Âą
FAQ
How can investors invest in oil?
There are several ways to potentially invest in oil either directly or indirectly, including oil company stocks, mutual funds, ETFs, and exchange-traded notes that track oil prices directly.
What sorts of factors determine oil prices?
There’s a long list of variables that may affect oil prices, including the goals of cartels like OPEC, production costs, natural disasters, and international relations or military conflicts.
What is OPEC?
OPEC is the Organization of Petroleum Exporting Countries (OPEC), a group of 12 oil-producing countries, including Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC makes up nearly 80% of the planet’s oil reserves.
Photo credit: iStock/kckate16
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
¹Probability of member receiving $3,000 is 0.026%. If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Mutual Funds (MFs): Investors should read and carefully consider the information contained in the prospectus, which contains the Mutual Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or SoFi's customer service at: 1.855.456.7634. Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risks. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may have tax implications.
Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.
Before investing, carefully consider the investment objectives, risks, charges, and expenses detailed in a Fund’s prospectus. This document contains important information and must be read carefully prior to investing; you can find the current prospectus by clicking the link on the Fund’s respective page.
Alternative investments are highly risky and may not be suitable for all investors. These investments often involve leveraging, speculative practices, and the potential for complete loss of investment. They typically charge high fees, lack diversification, and can be highly illiquid and volatile. Be aware that both registered and unregistered alternative investments, including Interval Funds, are not subject to the same regulatory requirements as mutual funds, and their illiquid nature may restrict your ability to trade on your timeline. Always review the specific fee schedule for Interval Funds within their prospectus.
SOIN-Q325-037