Why invest in Oil and Gas? – Economics 101
As we move toward a greener, more globally aware society, it is easy to wonder whether or not it is a good time to invest in the oil and gas industry. Oil and gas investing may seem intuitively like a step in the wrong direction. As a country, we’re trying to reduce our dependency on these resources in order to protect the environment, aren’t we? How can it be a good idea to invest in oil and gas?
What most people do not realize is that we rely on oil and gas for many more industries than just the automobile industry. We rely on oil in nearly every aspect of manufacturing, from the production of detergents and medicines to building materials and clothing. Petroleum-based products make up a significant portion of the materials we need every day.
The demand for oil continues to exceed 50 million barrels per day. And while the U.S. might be trying to reduce its reliance on petroleum-based energy sources for fueling automobiles, other countries like China are exponentially increasing their demand for petroleum products as their economies grow and more production demands need to be met.
Why invest in oil and gas? It’s a simple matter of economics—the law of supply and demand. Supplies of oil and gas may be going down, but demand is still going up. If you remember your basic economics lessons from high school, when demand goes up and supply goes down, prices increase. When you invest in a product whose price continues to increase, you have the potential of having very successful investments.
Another reason why investing in oil and gas is such an attractive idea is because of the tax benefits. In the U.S., oil and gas investing provides considerable tax protection, with up to 65% of your investment being tax deductible. If you make money on the investment, up to 15% of your investment income from the oil and gas industry is not taxed. In addition, depending on the way you structure your investment, you can actually own a share of the well.
According to Forbes Magazine, many Asian countries are entering a more consumer-driven age as well, demanding more products that rely on petroleum-based production. Since many of these countries are just beginning to enter the industrial age, their demands for oil and gas range from the need to establish basic services (heat, lights, electricity, bridges, roads, hospitals) to demands for consumer entertainment, food, and products at an exponentially growing rate.
You should never make any investment without doing your own research, but when you want to understand why to invest in oil and gas, it comes down to basic economics. Explore options and projects by checking back on this blog (http://www.petrolucre.wordpress.com) as well as visiting http://www.petrolucre.com
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