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Intelligent Investing #71 Glenn Leest, The Basics of Commodities Part 1

Intelligent Investing with Glenn Leest

Intelligent Investing with Glenn Leest
Intelligent Investing #71 Glenn Leest, The Basics of Commodities Part 1
Apr 29, 2023
Glenn Leest

Commodities – Oil and Natural Gas

1)    This episode is all about commodities, why did you choose to cover this topic? And what are you hoping the listeners get out of it?

·         Commodities should have a part in every investor’s portfolio, so it is important to understand what they are, how they work, and the differences between them.

2)    So, what are commodities and what are some that people are familiar with?

  • Oil
  • Natural Gas
  • Gold
  • Silver
  • Lithium
  • Wheat
  • Sugar
  • Soy
  • Timber
  • Steel

 

·         Commodities are raw materials or primary agricultural products that can be bought and sold in the marketplace. There are many types of commodities, Such as Oil, Natural Gas, Gold, Silver, Lithium and Wheat.

·         Commodities are generally interchangeable with other similar goods and are traded in large quantities, often on futures exchanges, where buyers and sellers agree on a price for delivery of the commodity at a future date. They are an important component of international trade and can be used as a hedge against inflation and other economic risks.

3)    Lets start off with oil then, what are some of the basics, how it is used and what influences its price?

Oil- The Basics

  • Oil, also known as petroleum or crude oil, is a fossil fuel that is formed from the remains of ancient plants and animals.
  • Oil is an important energy source and is used to power cars, airplanes, ships, and other forms of transportation. It is also used in the production of many products such as plastics, fertilizers, and chemicals.
  • Oil is traded on commodity markets and its price is influenced by a range of factors such as global supply and demand, geopolitical events, and economic conditions.

 

4)    Why is oil so important?

  • Energy: Oil is a primary source of energy for the world, powering transportation, electricity generation, heating, and many other processes. Without oil, many modern societies would struggle to function.
     
    • Driving your vehicle
  •  
    • Combustion engines – Farm Equipment, industrial machines, Trains, 

    • Consumer goods – Plastics
       
      • 7% of global petroleum use is for plastics.
    •  

§  Economic Growth: The oil industry is a significant contributor to many national and global economies. It creates jobs, generates tax revenue, and supports industries such as transportation, manufacturing, and construction.

§  Global Trade: The global trade of oil is a major component of international commerce. Countries that produce oil can export it to other countries, providing a vital source of income and strengthening their economic ties with other nations.

 

5)    What about some of the products that oil is used in? 

·         Products: Oil is used to make a wide range of products, including plastics, fertilizers, and chemicals. Without oil, many of the products that we use daily would not exist.

·         Pens, Upholstery, Boats, Sports Car Bodies, Fishing Lures, Bags, Cassettes, Dishwasher Parts, Tool Boxes, Helmets, Shower Curtains, Purses, Dashboards, Percolators, Life Jackets, Linings, Skis, TV Cabinets, Tool Racks, Car Battery Cases, Umbrellas, Toilet Seats, Fishing Rods, Speakers, Plastic Wood, Tennis Rackets, Dice, Trash Bags, Paint, PVC Pipes, Roller Skates, Surfboards, Wheels, Paint Rollers, Guitar Strings, Luggage, Safety Glasses, Awnings, Eyeglasses, Toothbrushes, Ice Chests, Combs, CD's & DVD's, Brushes, Vaporizers, Balloons, Sungl

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Glenn Leest
Senior Investment Advisor
WT Wealth Management
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