How the Crude Oil Price Affects Investing
When the price of crude skyrockets, there is a plethora of opportunities to invest — oil stocks, drilling projects, oil futures and more. So, how should you invest in oil and build a strategy that makes sense whether prices keep climbing, plateau or dip? You might be tempted to dramatically alter your current crude investing strategy and jump into deals with more risk. But before you ink any agreements, devise a plan that makes sense for your risk tolerance, amount invested and oil prices.
Invest in Oil Wells
We advise investing directly in oil wells in any oil price environment. When you invest in oil wells, you have more control over your investment. With a transparent investment, you know who you work with and their track record, the details about the investment structure, and the geological data behind the drilling plan. You can evaluate projects on their own merits and pick the ones you trust, as many as you like.
As with any investment strategy, diversification yields more balanced returns. If you invest in oil wells, we recommend investing in more than one so you increase your chance of a well striking black gold. After all dry holes do happen in conventional exploration.
You can also buy into both natural gas and crude oil wells so your energy portfolio is less affected by fluctuations in one market or the other.
Look for Deals That Make Sense in Any Oil Price
We focus on conventional drilling projects. Unconventional wells often have higher drilling costs that shrink your profit margins. We look at presenting investments that make economic sense even if the oil price dips. Then, if the oil price climbs, you reap an even greater windfall.
What About Oil Stocks?
Some people love investing in oil stocks, and that could be part of your strategy. What we love about investing in oil wells directly is having control over our investments. You decide which wells and projects to fund.
If a corporation makes a risky decision unrelated to their oil and gas assets, that can affect the price of oil stocks, even if crude oil remains high. Unlike oil stocks, your well investments aren’t affected by risks that originate at the boardroom, not at the well head.
What Does This Mean for Investors?
Create a crude investing plan that makes sense for you, taking into account what oil investments are economically sound in any price environment. Take control over your investments by investing in oil wells directly. Diversify into multiple oil and gas wells (that’s why EnergyFunders allows lower buy-ins). Then you have a strong oil and gas investment portfolio that stands to benefit as oil prices rise.
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