Regardless of whether oil prices move up or down from current levels, the trading range probably will be much higher than has been the case in the past. The same is true for natural gas, which averaged over $11 per Mcf (thousand cubic feet) in July 2008, up from $6.55 in the first half of 2007. With steep prices, profits are likely to be made in oil and gas, and the greatest profits may go to investors who participate directly, in drilling funds.
Most oil and gas drilling funds are private placements rather than publicly-offered investments. If you are interested, look for a program that will drill in different areas of the country, reducing your exposure to one particular area. So-called "in-fill" or developmental drilling near proven fields is usually less risky than exploratory drilling in search of a huge new discovery.
Drilling in fields where natural gas rather than oil is likely to be found may be a good strategy. Most generating plants built in the last 15 years are powered by natural gas so there is more demand, year-round. Also, natural gas may be considered cleaner than oil, so environmental concerns might increase the demand for natural gas, raising revenues for investors in drilling funds that find gas.