Is making oil and gas investments a good idea?
There are a number of big risks that come with investing in the oil and gas industry, which include volatility risk of the commodities, the chance of an oil spill / accident / natural disaster, dividend payments being cut off. That being said, long term investments in companies operating within this industry have the potential to be highly lucrative, which is why so many people are attracted to gas and oil investments. For the best Gas and Oil Investment Fund Info follow the link. Nonetheless, it is important that would be investors fully understand these risks before entering the industry.
Price volatility
The price of oil and gas can quickly and significantly change, leaving investors potentially out of pocket. For example between the years 2014 and 2015 there was a big increase in the supply of oil and gas which had a direct impact on their price. This has happened throughout history and will continue to happen. For instance, prices have been impacted on by the global coronavirus pandemic and are currently being affected by the war in Ukraine. Major global events, as well as more localized events can all have a direct impact on the price of oil and gas and so are things that need to be considered.
Oil spill
In the oil and gas industry, it is not uncommon for accidents to happen. Accidents like oil spills not only have devastating impacts on the local ecology, but also for investors, as it leads to a fall in the share price of said company. For example, the large oil spill that happened in the Gulf of Mexico in 2010 by BP caused their stocks to decrease by as much as 55 percent. There have been other such incidents with the likes of Exxon also and there is no reason why another one of these may happen again in the future.
Dividend cuts
Companies operating within the oil and gas industry regularly pay their investors with dividends, which is why so many people are attracted to them. However, the risk exists that these dividends can be cut where the company is unable to afford to. This risk is closely linked to the price volatility of these commodities. For instance, if the price of oil and gas goes down, companies will earn less from selling it and so, in turn, will have less profit to pay out to their investors.
The takeaway
Now that you are fully aware of where the risks lie and how significant they can be within the oil and gas industry, you are in a good position to be able to come to a decision on making an investment is a good thing for you personally. If you are not put off by the risks and are excited by the potential for high rewards, then, yes, it is a good idea to make an investment. However, for those people who are more risk averse, it may be worth looking at other investment options instead.
