How to invest in oil and gas companies, investment return, why invest in oil? Investment program for Oil and gas investors

The Oil and Gas Industry – History and Future

Investing in private oil and gas industries can be a very lucrative step. Oil and gas account for over half of the commercial energy consumed across the globe. Oil prices have been steadily increasing since 2005. Oil and gas are used in everything imaginable, thus the demand is high.

History of the Oil and Gas Industry

The first oil wells were not drilled to look for oil. The drilling was done to search for water and often oil was dismissed as a nuisance. Drilling would continue in search of water. One example is Cosicana, the first in Texas to produce a large amount of oil. By the end of 1900, this well had produced over 2 million barrels of oil.

Spindletop is another example. The belief of one man, Patillo Higgins led to the formation in 1892 of the Gladys City Oil, Gas, and Manufacturing Company. Although many people believed his ideas were silly, he knew that the future would bring changes in the fuel industry. He believed that coal would be replaced by oil. Although his dreams were not realized until 1901 when the well, Lucas 1, hit and flowed at almost 100,000 barrels a day, his beliefs were directly responsible for the modern day oil industry.

What Early Oil and Gas Exploration Produced

Following the realization of the potential of oil, private oil and gas investments have typically been very profitable for investors. These companies are some of the largest in the world. There are different types of investments within these industries. From exploration for gas and oil to refineries, the field is pretty wide open. Each carries the potential for profitability. Which one is decided on should be based on the degree of risk versus the return that can be realized.

Depending on the rate of return that investors are looking for, investments can include purchasing stock in private oil companies or if a higher rate is desired, direct participation is an option. Additionally, there have been tax deductions available for many years that make this type of investment profitable. Offsetting the capital gains tax is one. The ability to write off 100% of investments in oil and gas is very enticing when compared to other investments such as stocks and bonds.

Another thing that investors consider when putting their money into drilling for gas or oil is the tax deductions are available regardless of whether the well hits or not. This is very advantageous for those who are looking to invest profits from other sources and it has been for many years. These deductions have been in place for most of the last century. As a matter of fact, there are no other investments in the U.S. that have the tax breaks that are reaped by those who invest in the oil and gas industry.

There are thousands of independent gas and oil companies in the U.S. Investing in exploration with these companies is an option that does have a higher risk; however, the rate of return is much higher as well. Practically 90% of the wells drilled yearly in the United States are drilled by independent companies. Exploration and developmental drilling are the two most often invested in and developmental drilling offers investors the highest return as well as a lower risk.

The Future of the Oil and Gas Industry

As with all things, technological advances affecting the future of the oil and gas industry means more opportunities and increased exploration and production. An increase in the demand for natural gas to produce electricity is one of the opportunities. Large deposits of natural gas have been found in shale rock and some are predicting that this could result in the U.S. becoming a major exporter of energy.

BP has been tracking oil production since 1965. In 2012 production of oil grew faster than it had since this tracking began. New wells are being drilled and many states are benefiting from the expanded production of oil and gas. New jobs are being created, which is a plus as the economy recovers. In addition, new opportunities to make a profit from investments are increasing as well.

According to a report published in February 2013, between 2002 and 2012, private investments in the oil and gas industry have more than doubled. The only exception was a drop during the 2008 financial crisis. One of the things impacting this increase is the number of deposits of natural gas found in shale rock.

What is Responsible for Increased Production?

There are a number of factors that contribute to the increased production of oil and gas, which provides more opportunities for investors with less risk. Even with the current emphasis that is being put on using renewable energy, the drilling and exploration for oil and gas is not decreasing. The reason for this is that most experts believe that renewable energy will generally always require other fuels as a supplement.

As previously mentioned, technology is a major factor in the production of oil and gas. The advances that have been made such as better equipment and new ways of drilling are directly responsible for the production of more oil. Of course, tax incentives that remain in place are another advantage.

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