Is it a wise decision to invest in oil? It’s a difficult question to answer in these uncertain market conditions.
Learning how to invest in oil wells and gas requires a complete understanding of the shifting dynamics of the market. Oil investments have seen dramatic ups and downs during the last three years. While it is difficult to time the market, savvy oil and gas investments through opportunities offered by private equity based oil and gas companies can enable you to make a good profit. However, wealth creation takes more than a well-timed investment strategy. The 1% have amassed trillions of dollars by applying timeless financial principles that go beyond where to invest your money.
Before going into whether or not oil and gas is a smart investment, let’s look at common myths about investing in oil wells.
Myth 1 – Oil and gas reserves are rapidly depleting.
If you read the newspaper a couple of years ago, you would have assumed that oil production and demand peaked a long time back, especially with the advent of solar, wind, biodiesel, and other green alternatives. The influential Club of Rome consortium of industrialists, scientists, economists, and government officials popularized the idea of “peak oil,” which proved to be completely wrong.
“The Limits to Growth” was published in 1972, which was an extremely negative report based on MIT (Massachusetts Institute of Technology) computer simulations of economic and population growth, and resources assumed to be in short supply. The model anticipated that given the same consumption levels, all known petroleum reserves will be depleted by the end of the century. And if consumption rates kept rising gas and petroleum would be extinct by 1982.
What has happened is that we have become smarter at finding and extracting oil and gas. This is because of advancements in technology and discoveries. We now produce more oil in the United States than we did in our previously popular “peak oil production” era of 1970. At present, the United States leads the world in oil production, outperforming Saudi Arabia by 57%.
Myth 2 – Forget About Investing In Oil and Gas. The Opportunity Lies in Alternative Energy.
The actual truth is that global energy demand is continuing to rise, and this demand can be met by both alternative energy growth and oil and gas. Energy expert Alex Epstein says in his book “Fossil Future” that more oil, gas, and natural coal are needed to sustain human prosperity.
Alternative energy is a booming business with huge growth potential. It is attractive for environmental reasons. But it also comes with huge risks and costs, some of which have been paid by taxpayers.
The Nutshell
While energy sources in the United States and throughout the world are diversifying, demand for oil and gas has not dropped. Oil consumption continues to climb, especially in China, India, and the United States. The oil demand will always be there because of plastics (which are made from petroleum), trucks and heavy equipment that run on diesel. So, grabbing the opportunities offered by private equity-based oil and gas companies will yield good profits in the coming future.
