More volatility ahead for the oil price

Yesterday I noticed a new Exchange Traded Fund (ETF) available on the NYSE. DNO, or the United States Short Oil Fund, takes SHORT positions in oil futures. Therefore, it appreciates as the price of oil declines (in theory anyway - depends how the fund managers channel their funds into the short contracts).

Now, this is very scary. As if USO (The United States Oil Fund) and the tons of other professional instruments weren't enough to force $4 a gallon out of me (or $10/gallon out of my brother) at the pump for a while, the United States Commodity Funds Company (never trust a company with "International" or "United States" in it, or a country whose name includes the word "Democratic") has unleashed yet another way for speculators to, with the lure of a 30-day buck, move the oil price.

President Obama did promise closure of the "Enron loop hole" (Thanks again, Wendy Gramm), that allowed such commodity speculation, before he took office.

So I don't know whether DNO would survive the coming regulation...

So I've put off my temptation to purchase short put options on DNO (gasp! Second order derivatives on a commodity!)

Now for the interesting part.

1 barrel of oil = 42 gallons of oil = 159 litres
1 barrel of oil = about $65
1 barrel of oil yields about 4 gallons of gasoline (gasp! but remember the other fractions that you never see: coal tar, lighter fuel, kerosene, aviation fuel, plastics-grade products, pharma-grade product, etc)
Do the math..

I thought a barrel was this thing I saw at a keg party, or rolling down the planks in "Donkey Kong". But no, a barrel is bigger than I am...