Rising Oil Prices – Why They Can Be Bad News For Your Shares

The ongoing crisis in Libya is all over the news at the moment, and it is obviously terrible for the millions of people whose lives are affected. However it also affects all of us to some extent because the troubles in this part of the world are pushing the oil price higher and higher.

This means that we are all having to pay more to fill up our cars, and it is also affecting a lot of people who currently hold shares. You may not think that the rising price of crude oil could have a direct impact on your various holdings, but sadly this is not necessarily the case.

Not many investing courses, and that includes some very good training courses, do not talk about oil prices or indeed commodities in general. However the truth is that it is often the case that when oil continues trading higher, the overall stock market will fall. Therefore even your very best stocks may get dragged lower.

Not only that, but some companies will be directly impacted by these higher prices. So even if the wider market does not fall, they may still see their own share price fall as a result because they can obviously expect to see their profits being hit in the future.

This could affect obvious types of companies such as airlines and travel firms, but it could also have an impact on a wide variety of different companies. When you think about it lots of companies have delivery and distribution costs, so a higher oil price will end up being passed on to them at some point.

This is why it is often a good idea to try and protect your share portfolio in some way. So for instance you could invest in a few companies who stand to gain from a rising oil price, such as oil companies, or you could open a long position on the price of crude oil through a futures contract or spread betting position.

You could also look to buy exchange traded funds that track the price of crude oil, if you think the price is likely to continue going higher. There are a variety of different courses that teach you how to trade ETFs, but they are fairly easy to understand because you can buy and sell them just like ordinary stocks.

Anyway the point is that rising oil prices can have a negative impact on your share portfolio, and sometimes regardless of which particular companies you are invested in. However all is not lost because you can always take steps to hedge yourself should the price of oil continue to move higher.