Buying Oil Investments – Chapter 9: Advantages Of Investment In The Oil & Gas Industry

This is chapter number 9 out of 12. Read the rest:

Read Buying Oil Investments – Chapter 1: Introduction
Read Buying Oil Investments – Chapter 2: Getting started in oil investments
Read Buying Oil Investments – Chapter 3: Factors which affect the price of oil
Read Buying Oil Investments – Chapter 4: The determinants of Oil Prices
Read Buying Oil Investments – Chapter 5: Trading in Oil Futures: (The impetus of the market sentiment)
Read Buying Oil Investments – Chapter 6: Investment Options
Read Buying Oil Investments – Chapter 7: Exchange Traded Funds
Read Buying Oil Investments – Chapter 8: The Risks Of Investing In The Oil & Gas Industry

Investments in the Oil & Gas industry have always been regarded as a high return industry. The typically projected earnings from any investments in this industry normally runs from 5 to 10 times the initial amount invested. Though the risks are high, investments into this market continue to pour in mainly because of the alluring high returns of this sector. There are also several other advantages of investing in this market which makes the Oil & Gas industry an attractive area to invest in. 

Tax Benefits:

Based on Newsweek, oil drilling has one of the best tax incentives around in the US. Investors are able to write off as much as 65% to 80% in the first year for certain classes of investments. In some cases, 100% tax deduction is permitted.

High Profitability:

With oil & gas investments, you are able to earn profits with a ratio as high as ten to one within a year. This translate to a higher than 50% annual rate of return.

Calculated Risks:

Although the risks of investments in the Oil & Gas industry is high for certain type of investments, most investments undertaken in this sector are calculated risks. Technology has also help to the guesswork out of many aspects of oil explorations. In most cases, the project has a success rate of 90%.

Lower Drilling Cost & Choice Of Drilling Prospects:

Compared to before, there is a wide diversity of small-scale drilling prospects for an investor to choose from. In addition, drilling costs have dropped to an all time low due to decreased rig activity.  

Increasing Demand:

As the world’s economy becomes more developed and affluent, this has “fuelled” an increasing demand for energy and thus crude oil. As no viable substitute is in sight yet, the demand of oil is forecasted to increase further still.

Traditional Sources of Funding Unavailable:

 As it has become increasingly more difficult to secure funding from traditional sources, capital investments from private investors are being highly sought after. In return for the precious capital required to jump start a project, investors are being offered higher returns than ever.

Government Support:

The importance of oil has not gone unnoticed by Governments of many countries. Eager to boost the economy of their country, many governments are offering attractive tax incentives to encourage investment in this sector. 

Read Buying Oil Investments – Chapter 10: Investments in Gold versus Oil
Read Buying Oil Investments – Chapter 11: Peak Oil
Read Buying Oil Investments – Chapter 12: Conclusion