Strategy & Tragedy of
Investing in Oil & Gas Industry is one way i.e. one way growth of your
wealth; This is because this sector loads never flatlines: that is why - My
love is not a renewable energy source that could put the oil industry out of
business. FREE refills for valued customers can be done but not for all. That
is why, all countries still primarily rely on gas and oil to run businesses,
transportation, manufacturing and multiple other industries and earn by taxes
to run Governments. Oil & Gas powers every activity each person does. But
not all types of investments in this sector have positive effects. Like other
investments, Oil & Gas prices are controlled by a lot of factors. Majorly
it depends on discoveries, and its explorations, but hardly this factor changes
Oil & Gas price; Profit margins always hit the roof when deep well
exploration hits an abundant oil reserve that doesn’t mean it will cheapen the
Oil & Gas Price. It is known that the return of investment could be 300% to
350% in an average times larger than the initial capital. The wells are able to
pay off, and a rich well can last for years means OPEX remains the cost. An
abundant oil reserve also starts to gain profit after 2 to 3 months of discovery
which you can not expect in any Industry, I am not talking about Business;
PROFIT OF A COMPANY DEPENDS ON
ITS LEADER THE CHAIRMAN; Cheaper Oil & Gas can make the economy for buying
refinery or the Country; But it will break the Economy of the Oil & Gas
Producing Country; It hardly depends of the management formula – “Supply is
High, hence product will be cheaper”. If
the Supply is high, they buying refineries will store , that doesn’t cut the
market; A diverse portfolio that relies on multiple investments alongside oil
will also be able to maintain a balance when stocks stumble. This is because
economies and gas and oil market prices are usually indirectly proportional to
the other. When the price of oil hits high, which it does sporadically, you
will be able to bear the economic slowdown to the Countries who imports due to
high capital intensive investments. Oil & Gas is a Peacemaker Industry, who
unites countries, not divides. Most importantly, a great leader OF THE COMPANY
must serve the best interests of the people first, not those of multinational
corporations FOR STOCKS. Human life should never be sacrificed for monetary
profit.
Investors of oil and gas also
gain tax advantages in some not many countries, especially if they invest in
limited partnerships. Around 15% of your share can become tax-sheltered income
in some countries. Like in India we have SEZ norms, relaxation for 7 years Tax
Holiday or so. When the stock suffers due to depletion of resources, private
investors will accrue allowances and keep cash flow relatively controlled.
Investors can also benefit from what is called Intangible Drilling Costs, where
a percentage of their income in the first year is written off to cover for
incidental expenses. But that too depends on production sharing agreements
which varies from Country to Country;
But, it has tragedy too;
Despite the huge and fast return of investment and multiple tax advantages,
investing in oil is not without its risks. It may break you to MINORITY; For
one thing, the market price of oil is always fluctuating. The profitability of
an investment depends on a lot of local and international factors that are
often beyond the investor’s control. The percent of loss varies, but losing
100% of the project is not rare, especially on small, exploratory ventures. Dry
hole drilling is also another lose-all venture. But you can still accrue tax
benefits for this.
Sometimes it is better in Buying
into a limited partnership or private company, where the gains are bigger, also
means having to pay commissions that are higher than standard stockbroker fees.
In addition, investing in smaller companies may mean that your share is less
liquid than in larger or public companies but security risk of money is low
compared to investment in Government or any other big Companies. The income of
the investor is also subject to operating and maintenance costs such as fees
and production expenses.
It has some foul reactions
like the finally, you didn’t get the product as you have estimated in seismic
value to attract the investors; It may fall to the criticism but not the scam
over all; Scams are not uncommon in gas and oil investing. They could mask the
real condition of the exploration, and lie about the interests or even the
existence of a well. But it is just horrification of this trade, very few has
done this; but not a trend in Oil & Gas Sector; A leader should always be
open to criticism, not silencing dissent. Any leader who does not tolerate
criticism from the public is afraid of their dirty hands to be revealed under
heavy light. And such a leader is dangerous, because they only feel secure in
the darkness. Only a leader who is free from corruption welcomes scrutiny; for
scrutiny allows a good leader to be an even greater leader.
Thank You.
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