Oil and Gas – A Good Investment?

There are many things that you could add to your good investment portfolio. You could invest in foreign exchange, where you can earn money within the day from currency movements. You could bet on companies and buy stock. You also have the option to invest in commodities. 

Commodities are real, tangible products that you could put money into for various purposes. You could, for instance, invest your money into oil and gas drilling, or for gold mining. For the latter, you could also invest in real gold bars whose tangible value remains unaffected by twitches in the general market.

How about oil and gas? Are these commodities ideal for earning passive income from? Let’s find out what the advantages are from putting money into these commodities.

The Pros

Here are some of the benefits that you can enjoy from investing money in an oil and gas drilling project:

  1. Quick turnaround of investment
    If a newly discovered oil well turns out to be abundant in raw oil supply, you could enjoy returns from your infusion of cash in as fast a time as 90 days. With the demand for oil as high as it is today, there will always be a sure buyer from each gallon of crude oil pumped from your wells.

  2. Huge returns
    As mentioned above, there is a huge demand for oil. You could earn up to 500% times of your total investment, which is more than enough to offset the speculative risks that you are exposed to as an investor.

  3. Tax shelters
    To encourage the flow of cash into this globally valuable industry, governments around the world offer tax incentives to potential investors. The actual benefits vary from country to country, so you’ll have to check your own laws or the laws of the country in which your potential oil well is located.

  4. Advancements in technology
    Oil surveying is undeniably high risk and very speculative, but advancements in technology nowadays help engineers to be more accurate in their search for oil wells. This in turn lowers the risk that you are exposed to.

Now that we’ve discussed the pros, it’s time to turn our attention now to the possible disadvantages.

The Cons

There are only three identifiable risks to investing in an oil and gas drilling project. These are:

  1. Price volatility
    Oil prices can go up and down, and they do so in very drastic movements. Before you decide to invest in an oil project, conduct due diligence and determine what your costs are. You could also check the news to determine if possible price movement in the next 90 days could offset your costs and turn out a profit.
  2. Existence of scams
    As with any profitable endeavor, there are always seedy individuals or parties that would seek the bleed investors dry without returning anything. Again, conduct due diligence and investigate any potential investment, especially in oil and gas.
  3. Risk of drilling a dry hole
    There’s always the risk of looking in the wrong area for oil. Drilling to confirm supplies is definitely speculative. You could lose your entire money if the hole does not actually have any gas. Thankfully, updated technology these days help to make oil surveys a lot more accurate.

As with any investment, conduct a lot of research before you make up your mind. Don’t also forget that you should only invest money that you can afford to lose, and not your hard earned savings.

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