UPDATED — As someone whose family has been in the oil and gas industry through four generations, I have always followed the industry’s developments. Because of my observations and insight, I firmly believe that we have been presented with a favorable opportunity for investing in oil and gas.
Presently, the market presents a compelling case for investing in oil and gas, driven by recent industry dynamics. Even now, with WTI at $78.26 per barrel and gas prices averaging $3.353 (down from $3.609 a month ago), the current landscape holds promising prospects for potential investors.
The surge in oil prices over the past six months, up by over 8%, underscores the industry’s resilience amid global demand. Despite burgeoning interest in clean energy and electric vehicles, the steadfast demand for oil persists, driving prices upward—a crucial indicator of the sector’s economic viability.
However, a concerning trend emerges as oil and gas companies curtail investments in new reserves. Rather than channeling profits into exploration and production, companies focus on debt reduction, stock buybacks, and dividends. This shift might lead to a future supply-demand imbalance, potentially escalating prices and enhancing returns for investors.
While the world embraces cleaner energy, the transition remains gradual. The burgeoning global population ensures sustained demand for oil and gas in the foreseeable future. Electric vehicles, while on the rise, currently represent a mere 1-2% of all vehicles on the road. Hence, the enduring necessity for oil and gas solidifies the rationale for investments in these resources.
Beyond the industry’s inherent strengths, investing in oil and gas offers substantial tax benefits, historically incentivized by the U.S. government. Leveraging these advantages can significantly diminish overall tax liabilities, augmenting the appeal of investing in the sector.
Diversified investment options in oil and gas cater to varying risk appetites and financial objectives. Whether opting for established companies like Exxon or exploring opportunities in smaller firms such as Ring Energy, the industry offers investment avenues for diverse preferences—ranging from private funds to royalties and working interests, enabling portfolio diversification and potential growth opportunities.
Considering the recent surge in oil prices, sustained demand, tax benefits, and diversified investment options, now presents an opportune moment to contemplate investments in the sector. Nonetheless, prudent decision-making demands thorough research and consultations with financial experts to align investments with individual financial goals.
The resilience of oil and gas in the face of changing energy landscapes, coupled with its tax benefits and diverse investment avenues, make it a compelling consideration. While global transitions unfold, the robust demand for oil and gas remains a solid foundation for potential investors, provided they approach investments with informed strategies and guidance.
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