Americans are continuing to see relief at the pump, as gas prices keep slipping to levels not seen in years.
That’s due, in part, to US oil flooding the market, much of it produced through the controversial technique known as fracking.
Over the next few months, our Inside Energy team will be examining the FINANCING behind the country’s energy boom…
In this first story, Reporter Dan Boyce looks into how that financing may impact you, through your investments.
We wanted to start with a concrete example.
So we thought, let’s see how much oil and gas stock is in my retirement account--a Roth IRA from T. Rowe Price.
On the day we looked I had $4,244.36 saved up for retirement.
Robust, I know.
...
Look, the amount isn’t the point.
JORDAN: “So, let’s just walk through it, so like…”
(Sound ducks under)
I had no idea how many different places my money is invested.
Inside Energy data journalist Jordan Wirfs-Brock and I are breaking it down here.
My $4200 is split among 19 different T. Rowe Price funds.
JORDAN: “The international growth and income fund, the T. Rowe Price equity index 500 fund.”
Close to 90 percent is in stocks.
We have to then look into each one of these 19 funds to see all the different stuff I’m invested in.
JORDAN: “Everything you could imagine.”
It’s literally thousands of companies.
JORDAN: “Dicks Sporting Good.”
DAN: “OK.”
JORDAN: “WD40.”
JORDAN: “Tootsie Roll Industries.”
DAN: “Really?!” (laughs)
and our favorite.
A fraction of a fraction of a percent of my money is in professional wrestling.
JORDAN: “World Wrestling entertainment, the WWE.”
DAN: “Yes.”
As for Oil and gas - they make up about nine percent of the total stock market.
We find in my own IRA, it’s a little less than six percent.
MIDDLETON: “At the current time, it would be about roughly about $243 would be invested in energy companies.”
This is Scott Middleton.
MIDDLETON: “I am a consultant and also chair of the investment committee at Innovest.”
They advise people and institutions on where to park their money.
So here’s the deal, if you have a retirement account,
And tens of millions of Americans have an IRA like mine, or a 401K or a 403B, or they’re invested in a mutual fund.
More or less, your retirement account looks like my account.
…
Well, your account is probably a lot bigger than my account.
But, as far as the makeup, how much invested in oil and gas.
It’s going to be similar.
Probably somewhere between five and ten percent.
Here’s Jennifer Paquette, Chief Investor for the Colorado Public Employees Retirement Association.
PAQUETTE: “We have approximately seven percent that are in invested in energy related investments.”
That’s out of the pension’s $45 billion dollar total worth.
It’s a plan which serves over half a million people.
PAQUETTE: “The way we’re positioned right now is we are slightly underweight energy.”
In other words, the pension’s investors have been pulling back some of the money they have tied up in oil and gas.
Back to Jordan and my talk with Scott Middleton, that investment consultant.
(AMBI up of Jordan)
JORDAN: “You know, today Dan might have 5 and a half percent…”
He tells us that yeah, as oil prices shrink, so goes my $243 dollars in oil stock.
MIDDLETON: “The value of your investment in energy companies would also decline accordingly.”
A couple of really important things to remember, though.
I’m betting on my IRA for the long-term--so short term fluctuations in price shouldn’t really concern me, or, concern us.
And over the long-term, energy has been a very safe investment., with about a ten percent annual rate of return.
Also, we’ve already heard how diversified my IRA is.
JORDAN: “3M.”
DAN: “Chipotlle Mexican Grill.”
JORDAN: “Proctor and Gamble.”
So Middleton says while the oil prices might be bad for one part of my portfolio, it’s good for other parts.
MIDDLETON: “Especially the chemical producers, their costs are lower, so they tend to do well.”
Transportation companies too.
Ultimately, oil and gas is not a critical part of my retirement fund.
But make no mistake, our retirement funds are absolutely critical for oil and gas.
The American Petroleum Institute says about 70 percent of US oil company worth is owned by tens of millions of US households, through our IRAs, our pensions, our mutual funds.
For Inside Energy, I’m Dan Boyce.
