As oil and gas became the main source of energy, especially during the mid-2000's, oil and gas prices increased proportionately. Oil and gas investment became the most lucrative investment opportunities due to energy demands estimated to be 86-87 million barrels a day according to the Organization of Petroleum Exporting Countries' 2008 figures.
Tax exempt investment in an oil or gas trust should be considered by the investor seeking direct sector exposure. The process involves investing in the production stage, or during the purchase of exploratory drilling machinery. The process provides a pass through treatment from investments and incomes in this energy sector, with mutual funds and future contracts in the oil sectors being the most common investment undertaken.
The oil and gas industry offers a number of investment opportunities with investment in shares available at any time. It is safe to say that any investor has an opportunity waiting for them. For example, an investor can have an investment in oil drilling, as well as in the company's future contracts. Cautionary measures should always be taken like all other investment opportunities where investors need to carefully research all risks.
What drives the world economy is basically oil and gas. There are many ways by which the products from gas and oil can be used, therefore, anything that happens within this sector has the power to change the direction of a country's economy.
During exploration, companies lease or buy land in known areas near, or containing, proven energy resources to improve their chance at profit realization This process still carries an element of risk as striking oil cannot be guaranteed by the existence of other resources alone. Further support and services are needed such as transportation, pipeline providers, shipping, logistics, equipment manufacturers, refiners and rigging.
Historically the oil industry has played the role of a diversifier in the economy as when oil and gas prices rose, the economy would generally be slow. Investors in the energy industry are cautioned of this trend. Also, large profits are realized which can even amount to 10 times the initial capital invested. The sector also enjoys many tax advantages as most tax is invisible to a shareholder who buys shares from a public traded stock.
When oil or gas is not found during drilling, huge losses can be suffered by investors due to the volatility of these sectors. Shares in smaller companies are harder to liquidate and usually require direct contact with the company. The use of a broker can incur commissions of more than 20% of liquidation funds received.
Another risk includes people risk. The professional ability of the explorer cannot be underestimated as the experience of the operator plays a key role in profit realization. There are mechanical risks, as the actual oil and gas exploration involve a lot of activities hence all the mechanical questions must be answered prior to the actual drilling. The reserve risk takes into consideration the well control and the seismic evaluation of the well. Finally, the commodity price risk must be catered for.
Tax exempt investment in an oil or gas trust should be considered by the investor seeking direct sector exposure. The process involves investing in the production stage, or during the purchase of exploratory drilling machinery. The process provides a pass through treatment from investments and incomes in this energy sector, with mutual funds and future contracts in the oil sectors being the most common investment undertaken.
The oil and gas industry offers a number of investment opportunities with investment in shares available at any time. It is safe to say that any investor has an opportunity waiting for them. For example, an investor can have an investment in oil drilling, as well as in the company's future contracts. Cautionary measures should always be taken like all other investment opportunities where investors need to carefully research all risks.
What drives the world economy is basically oil and gas. There are many ways by which the products from gas and oil can be used, therefore, anything that happens within this sector has the power to change the direction of a country's economy.
During exploration, companies lease or buy land in known areas near, or containing, proven energy resources to improve their chance at profit realization This process still carries an element of risk as striking oil cannot be guaranteed by the existence of other resources alone. Further support and services are needed such as transportation, pipeline providers, shipping, logistics, equipment manufacturers, refiners and rigging.
Historically the oil industry has played the role of a diversifier in the economy as when oil and gas prices rose, the economy would generally be slow. Investors in the energy industry are cautioned of this trend. Also, large profits are realized which can even amount to 10 times the initial capital invested. The sector also enjoys many tax advantages as most tax is invisible to a shareholder who buys shares from a public traded stock.
When oil or gas is not found during drilling, huge losses can be suffered by investors due to the volatility of these sectors. Shares in smaller companies are harder to liquidate and usually require direct contact with the company. The use of a broker can incur commissions of more than 20% of liquidation funds received.
Another risk includes people risk. The professional ability of the explorer cannot be underestimated as the experience of the operator plays a key role in profit realization. There are mechanical risks, as the actual oil and gas exploration involve a lot of activities hence all the mechanical questions must be answered prior to the actual drilling. The reserve risk takes into consideration the well control and the seismic evaluation of the well. Finally, the commodity price risk must be catered for.
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