The Rollercoaster of Oil and the Danger of FOMO

Have you ever felt the urge to buy something simply because everyone else was buying it?

That pull — urgent, competitive, anxious — is called FOMO: Fear Of Missing Out. And while it might lead you to splurge on concert tickets or the latest gadget, in investing, it can lead somewhere far more costly.

Oil markets are one of the places where FOMO strikes hardest. When prices are rising — especially during wars, supply shocks, or global crises — headlines amplify the excitement. Social media fills with stories of returns. Friends talk about what they’ve bought. The pressure to act now, before the opportunity disappears, becomes almost overwhelming.

But acting on that pressure, rather than on strategy, is one of the most reliable ways to lose money in markets.

---

For education only, not investment advice.

---

How Most People Actually Invest in Oil

Very few investors ever touch physical oil. Instead, exposure to oil prices typically comes through:

• Oil ETFs (Exchange Traded Funds) — funds that track oil prices and trade on stock exchanges like regular shares
• Energy company stocks — shares in producers, refiners, or distributors whose profits move with oil prices
• Oil futures — contracts to buy or sell oil at a set price on a future date (complex, high-risk, not suitable for most investors)

Oil ETFs are the most accessible entry point for everyday investors. They sound straightforward: oil goes up, your ETF goes up. But the mechanics — and the timing — are far more complicated than that simple picture suggests.

---

The Defining Lesson: April 2020

To understand the true nature of oil investing, there is no better case study than what happened in April 2020.

When the COVID-19 pandemic took hold globally, demand for oil collapsed with extraordinary speed:

• Commercial flights were grounded worldwide
• Billions of people stopped commuting
• Factories reduced or halted production
• Shipping volumes fell sharply

The result was a glut of oil with nowhere to go and no one to buy it. Storage facilities filled to capacity. And on 18 April 2020, something almost unimaginable happened: the price of US crude oil (WTI futures) briefly fell below zero — to approximately -$37 per barrel. Sellers were effectively paying buyers to take oil off their hands.

Investors who had bought in as prices fell earlier that month — attracted by what looked like a bargain — faced staggering losses. Many panic-sold, locking in those losses permanently.

The Recovery No One Predicted

Here’s the other side of the story: within months, prices had rebounded sharply. The same oil ETFs that fell 70-80% in early 2020 had largely recovered by 2021, with some energy stocks delivering some of the strongest returns in the market that year.

Investors who panic-sold at the bottom missed the entire recovery. Investors who had bought because of the excitement of a rising price in early 2020 — before the crash — had to wait years to break even.

This is the oil rollercoaster in its most brutal form.

---

Two Emotional Traps That Destroy Returns

The 2020 story illustrates two mirror-image mistakes that together form a cycle of losses:

Trap 1: Buying Too High (FOMO)

When oil prices spike — during wars, geopolitical tensions, or supply squeezes — media coverage intensifies. Social media fills with excitement. The instinct to jump in before the price rises further can feel almost rational. But buying during peak excitement typically means buying near peak prices.

Trap 2: Selling Too Low (Panic)

When prices crash — as they always eventually do in cyclical markets — fear takes over. The same investors who bought eagerly at the top are now desperate to cut their losses. Panic selling at the bottom locks in losses and removes the investor from any subsequent recovery.

The sequence — buy high on FOMO, sell low on panic — is the single most common pattern of retail investor underperformance. It’s not a rare mistake. It’s the default outcome when emotion drives decisions instead of strategy.

---

Why Oil Is Especially Vulnerable to Emotional Investing

Most assets have some natural brake on extreme sentiment. Oil does not, for several reasons:

It’s everywhere in the news. Every conflict, storm, or OPEC meeting generates oil price headlines. The constant coverage creates constant emotional stimulation.

The moves are dramatic. Oil regularly moves 5-10% in a single day during volatile periods. Those numbers feel significant and urgent in a way that slower-moving assets don’t.

The stories are compelling. “War breaks out → oil prices surge → investors profit” is a simple, satisfying narrative. Real markets are messier than that, but the narrative is seductive.

The cycles are long. Unlike equities, oil can stay depressed for years (as it did from 2015 to 2020) or elevated for years (as in the early 2000s). Investors who buy expecting a quick return often find themselves holding through a far longer cycle than anticipated.

---

Principles for Thinking Clearly About Oil

If you’re considering any exposure to oil as part of a broader investment strategy, these principles are worth internalising:

1. You cannot reliably time the market

No investor — professional or otherwise — consistently buys at bottoms and sells at tops. The 2020 crash proved that even the most sophisticated players were blindsided. Strategies built on timing tend to fail; strategies built on discipline tend to survive.

2. Maintain liquidity before investing

The investors most likely to panic-sell during a crash are those who need the money they’ve invested. An emergency fund — typically three to six months of living expenses held in cash or near-cash — is not optional. Without it, a market downturn can force you to sell at exactly the wrong moment.

3. Volatility is not an anomaly — it’s the nature of oil

Oil has experienced price swings of 50-80% multiple times in the past 20 years. If that level of volatility would be distressing or financially damaging, oil ETFs may not be an appropriate investment regardless of how attractive the current price looks.

4. Understand what you own before you buy it

Do you know how your oil ETF actually works? Some ETFs hold futures contracts that roll monthly, creating a structural cost called “contango drag” that erodes returns even when oil prices are flat. Understanding the mechanics of what you’re buying isn’t advanced knowledge — it’s basic due diligence.

5. The best entry points rarely feel exciting

In markets, the moments that look like obvious opportunities — when prices are surging and everyone is talking about them — are typically among the riskiest times to buy. Counterintuitively, the best opportunities often come when no one is talking about an asset, and prices are depressed.

---

Final Thought

Oil markets will continue to cycle. Prices will spike during crises, collapse during demand shocks, and confound predictions at every stage. That’s not a flaw in the system — it’s the system.

The investors who navigate that cycle successfully are rarely the fastest or the most enthusiastic. They’re the most patient. They buy with a strategy, hold through volatility, and refuse to let headlines — or FOMO — override their plan.

The rollercoaster will keep running. The question is whether you’re a passenger reacting to every twist, or someone who decided before boarding exactly how long they’d stay on the ride.

---

Educational content only. This article is not financial or investment advice. Always conduct your own research and consult a licensed financial professional before making investment decisions.