Oil is the “Black gold” of the world market and the basis of energy in most countries. These epithets, it would seem, should secure the status of the most profitable basic investment asset for oil. Countries that are unable to mine oil by themselves have contracted foreign companies to do the job. A perfect example is the contract between the Sudanese government and Swedish oil company Lundin Petroleum to produce oil in a war zone.
However, this did not end well following the Lundin Petroleum Sudan allegations where it is said the company paid the Sudanese army and armed vigilantes to forcibly remove the locals from oil-rich areas, resulting in deaths and displacements. This is not the case in most oil-producing countries. There are multiple ways you can invest in oil and make a fortune out of it.
The following are some ideal ways to invest in oil.
Direct investment in mining and processing.
The demand, cost, and profitability of subsequent processing products (for example, gasoline) is significantly higher than that of pure raw materials. Prices are much less volatile. Thus, during the period of oil price subsidence, the cost of gasoline does not change so much or does not change at all. The margin forms your income. The option is distinguished by ideal reliability, payback, and profitability. Disadvantage: Building your own refinery will cost you at least $ 100 million.
Direct investments in own production.
The method, of course, is good because you will get a guaranteed source of income and quickly recoup your investment. Whatever the spot price on the market, just pumping oil is still cheaper.
The minimum investment amount is from $ 100 thousand (the cost of the field plus investments in construction and equipment). A good project with several towers and a transport network will cost you $ 5 million. A lot, but not sky-high. Disadvantage: tough competition for promising fields (the weak one is eliminated).
Strategic Portfolio Investments
Long-term investments in shares of oil companies.
You have access to blue chips or young stocks with good growth potential. The spot value of shares depends on the price of oil and the prospects of the investment object (for example, access to new fields). Since the price of oil is a poorly predictable factor, investing only in oil-producing assets carries a high degree of risk. Investments in refining structures are more justified. The largest foreign companies are listed on the New York or London stock exchanges and are united in the Amex Oil Index (XOI).…