Here’s a classic investing mistake: doing the same thing that failed before, just in a new situation. Remember when Australian farmers imported cane toads to solve their pest problem? Spoiler alert: the toads ate everything *except* the pests they were supposed to control. Investors are doing something similar right now with oil.
Since the U.S. struck Iran in late February, retail investors have dumped $685 million into oil ETFs like USO, convinced they’re riding the next energy boom. But here’s the thing—they’re not actually buying oil. They’re buying futures contracts, which is like trying to catch a moving target by constantly jumping ahead of it and missing slightly every time. Eventually, those small misses turn into massive losses.
The math is brutal. USO has lost about 80% of its value since 2006, *even though* oil has gone through multiple booms in that same period. That’s not a coincidence. It’s the structure working against you.
Here’s why: Oil ETFs don’t track oil prices well. They’re constantly resetting positions, often buying high and selling low. And even when oil prices spike, these funds lag behind the move. By the time headlines hit and retail investors pile in, much of the upside is already gone.
But there’s a deeper problem. Oil itself isn’t a great long-term investment because high prices fix themselves. Every time oil surges, the world finds new ways to increase supply—new drilling, new tech, alternatives. In 2022, oil hit $120 during the Russia-Ukraine conflict. Within months, it fell below $70 as supply adjusted and demand cooled. This pattern repeats like clockwork.
So what should you actually do?
**Option one:** Skip the oil ETFs and buy specific energy companies instead. Look for low-cost producers that make money whether oil is at $150 or $50. These companies have real fundamentals, not just commodity price exposure. Some of these plays are already up 36% in a month—and that’s without the lottery-ticket volatility of futures-based funds.
**Option two:** Ignore oil entirely and look where the real opportunity is hiding.
While everyone’s focused on oil headlines, the actual money is flowing into the physical infrastructure powering AI. Raw materials, energy, memory chips—the unglamorous stuff that actually makes AI systems work. These are the “Golden Rivets” of the AI boom, and they’re where the biggest winners will emerge.
Think about past tech booms. The most visible companies didn’t always win. The real winners were the ones supplying what made the boom possible. Same thing is happening now with AI infrastructure.
The lesson here? Sometimes the biggest investing mistake isn’t being wrong about the trend. It’s using the wrong tool to play it. Oil ETFs are the cane toads of energy investing—they look like they should work, but they’re solving the wrong problem.
Stop chasing the obvious trade. Start looking at where the constraints are actually building.
