The pundits calling for gasoline prices to top $6 per gallon are often laughed at, even as the average price of filling up the gas tank continues to increase. In short, the prediction may be more realistic than many thought.

With the national average for a gallon of gasoline closing in on $4 per gallon (currently $3.96) and no end in sight to the trend higher, investors have to start thinking about adjusting their portfolios accordingly.

The one caveat with investing for higher gasoline prices is that both the short-term and long-term outlooks must be analyzed and the proper investments chosen based on those two levels of analysis.

For ETF investors, that means petroleum-related plays in the nearer term, whether futures- or equities-based funds. And, over the longer term, that means looking at alternative energy plays such as natural-gas-related funds or portfolios related to battery technology such as Global X’s lithium fund (NYSEArca: LIT).

The Causes

Three distinct causes are behind gasoline’s recent rise, starting with the weakness of the dollar in currency markets.

The dollar hit a fresh three-year low this week, which, among other effects, makes the price of energy less expensive in countries where currencies are rising against the dollar. This increases demand, and pushes up the price of gasoline for U.S. consumers.

Geopolitical unrest in oil-rich regions of the world—notably Libya—has pressured supplies and caused the price of oil and, therefore, gasoline, to rise. It doesn’t appear the turmoil will subside anytime soon, giving gasoline a built-in premium.

Most importantly, a dynamic of increasing oil demand at a time of relatively stable supplies is likely to be a long-term driver of gasoline prices. U.S. demand isn’t increasing rapidly, but emerging market countries, such as China and India, continue to require more gasoline to fuel a growing number of cars on their roads.

Short-Term Plays

If you’re on the same page as me, and think the price of gasoline will keep moving higher, there are a couple ETFs to consider for a short-term move. The United States Gasoline Fund (NYSEArca: UGA) is designed to track gasoline futures prices on the New York Mercantile Exchange. The ETF has a 0.60 percent annual expense ratio and is the only pure-play gasoline futures ETF available for investors.

The second play, the equities-based Global X Oil Equities ETF (NYSEArca: XOIL), was launched in March of this year. It’s composed of 25 equally weighted stocks of companies based in the U.S. and Canada. The index cherry-picks firms whose shares have historically shown a high correlation to the price of oil. Because gasoline prices often fluctuate with oil, owning XOIL is likely to be an efficient way to play any spike in gasoline prices. The ETF has a 0.49 percent annual expense ratio.

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