After soaring to absurdly high levels just below $150 per barrel, the price of oil lost approximately 75 percent of its value and bottomed out at $35 per barrel.

[VIDEO] Investing in Oil Through Oil ETFs

At the time, I didn’t think the price of oil was going to drop below $35 per barrel for the following reasons:

• $35 per barrel was resistance for years and years. Once oil broke up above $35 per barrel in 2004, the $35 price level became a strong support level.
• As the economy begins to rebound, demand for oil is going to increase—especially in China.
• The future value of the U.S. dollar (USD) is going to be damaged by all of the money the U.S. government is pumping into the markets. As the USD goes down, the price of Oil will go up.

We have now seen the price of oil break up and through resistance at $50 per barrel, and it will most likely stay near this level and continue moving higher as we head into the summer driving months in the United States.

Taking Advantage of the Boom with ETFs

One of the easiest ways you can take advantage of the coming rise in oil prices is through exchange-traded funds (ETFs). Oil-based ETFs increase in value when the price of oil goes up.

Here are a few ETFs you should look at if you believe the price of oil is going to go up:

– iPath S&P GSCI Crude Oil Total Return ETF (OIL)
– United States Oil Fund LP (USO)

Don’t Agree? Think Oil is Going to Drop?

Of course, you may not agree with me. You may believe the price of oil is going to drop even farther. If so, you can still take advantage of oil prices using “short” ETFs.

“Short” ETFs are investments that increase in value when the price of the asset covered by the investment goes down. In other words, short oil ETFs make money when the price of oil goes down. Here are a few short ETFs you should look at if you believe the price of oil is going to go down:

– MACROshares $100 Oil Dwn Trust ( DOY)
– ProShares UltraShort DJ-AIG Crude Oil ETF (SCO)