How To Invest In Oil...

How To Invest In Oil

As the year starts off, investors are finding themselves in a posture they didn't anticipate. The United States. economy looks like it's expanding more than what most analysts thought.

It is tough to say whether that expansion will continue to speed up in 2012. However signs that the economy may be strengthening have raised oil prices already. That's partly because energy firms often lead the way during expansions as more trucks loaded with merchandise clog the freeways and more people top off their cars with gas on the way to their job.

But do not run out and acquire giant energy company stocks, ETF's or mutual funds from the likes of Exxon Mobil Corp or Chevron Corp just yet because that is only one way of the Four possible ways to invest in crude oil. And it typically will produce you the smallest returns on your investment.

The 4 Best ways To Invest In Oil Companies

1) Oil Well Drilling (Domestic United States)

2) Oil and Gas Royalty Interests

3) Mineral Rights

4) Stocks, Mutual Funds or ETF's

Why Global Tensions Are 'Good' For Gas and Oil Investments

The price of oil is infamously not easy to predict. Earthquakes, politics, and, increasingly, investors can impact oil prices unexpectedly.

Having said that, worldwide concerns could very well send the cost of oil higher for the short term. Oil prices are already over $100 a barrel, for a gain of almost $10 over a single week.

Iran's first vice-president warned that the passage of crude will be stopped from the crucial Strait of Hormuz in the Gulf if international sanctions are imposed on its oil exports. This turmoil is keeping the oil market on edge.

"Anything that happens that could lead to the closure of the (shipping lane) would be extremely bullish for oil," said Peter Beutel, president of Cameron Hanover, a consulting firm that specializes in energy risk management.

More recent bombings in Iraq, in the mean time, are increasing concerns about security after the U.S. military have withdrew.

"There's no reassurance that something crazy won't happen there that sends... oil up to $150 or $200 a barrel," said Mike Breard, an energy professional at Hodges Capital Management.

Investors don't need to wade too deeply into commodities to capture such gains.

Abraham Bailin, an ETF analyst at Morningstar, states that although ETF's can generate unwanted tax liabilities.

Scott Pasinski of Domestic Development out of Dallas Texas states, Investing in domestic oil wells is the smart answer, Its actually considered real property (real estate) via laws enacted by congress and the IRS used to stimulate domestic oil production. It not only provides a secure how to invest in oil bluegold investment environment; it also provides investors a superior 85% to 100% tax write off, along with a documented 25% to 45% returns, annually.

Gas and Oil Prices Relate To The United States Economy

Europe's financial issues could keep a cap on oil costs. Several euro zone nations are expected to slide into recession in 2012. And if one or a lot more countries abandon the European Union's single currency, the euro, the United States dollar would likely move higher. Either could help mitigate the impact of oil costs for U.S. buyers.

"A stronger dollar means that there will be more money in consumer's pockets," said Quincy Krosby, market strategist at Prudential.

If a more robust dollar softens the influence of oil prices, organizations that concentrate on the U.S. domestic economic climate like retailers and automobile makers ripe for out performance, she stated.

Domestic oil drilling companies, which have a tendency to be much more immersed within the U.S. domestic marketplace than the large cap businesses, would most likely benefit most from a dollar's climb.

The long Term View Of Investing In Oil and Gas

As the need for oil increases and exploration becomes more challenging, a lot more capital will circulate in to the enterprise of drilling crude oil.

"We've found all the easy oil in the world," said Breard, the energy analyst at Hodges Capital Management. This is the dominant reason new technologies; such as fracking, horizontal drilling, deep drilling, 3-D/4-D seismic technologies are so important for oil revitalization.

"Oil revitalization? Yes, oil revitalization", states Scott Pasinski of Domestic Development, "this is the process of rehabbing existing income producing domestic oil wells using superior technological advances and drilling methods. By working closely with our investors, our and veteran management is able to follow a 'franchise-like' formula and uncover the 10% of opportunities that offer extremely high ROI and a secure investment in an otherwise volatile world. We successfully rehab these under-performing and mismanaged opportunities into what we call, 'Superior Investor Grade Opportunities' cause they typically produce passive returns of 30%+".

Drilling and service companies are more likely to reap the benefits of this move to harder-to-get oil than large energy businesses like Exxon because of a growing dependence on deep water drilling and fracking -- a procedure that utilizes high pressured liquids to extract oil from deep rock formations, says David K. Randall from Reuters.

Drilling companies will still to benefit from an industry-wide improvement of rigs, many constructed 30 or Forty years ago.

"In almost every scenario, limited global supply growth will likely mean higher-for-longer oil prices," over the next five years, said Francisco Blanch, global investment strategist at Bank of American Merrill Lynch.

"Oil is energy and we will always need energy, as well the incredible need for the 6,000+ products we use every day that are made from petroleum products, including everything made of plastics," adds Charley Havens CEO of Domestic Development. "It's a safe place to invest and returns average 25 to 45 percent, which is great for both monthly cash flow and retirement planning. We are also planning to hire about 300 people in the next few months, so when people invest in oil with a self-directed real estate IRA they are also investing in U.S. job growth."