Oil and gas are fundamental to the U.S. and global economy, as well as to consumers’ day-to-day lives. After 2020, it’s easy to feel skittish about investing in oil and gas, especially when some pretty loud voices are persistently saying that we’re now ushering in the era of green energy.
Sure, green energy is great and everything. But here’s the truth: the oil and gas industry helped to build the U.S. economy. It made it prosperous and globally competitive. So let’s be realistic. Oil and gas consumption isn’t simply going away, either here or anywhere else.
Below we’ll explain why the oil and gas industry is here to stay. We’ll talk about the oil and gas industry outlook, the rise of green energy, mineral rights investing, and how it all might impact your financial strategy.
- Oil and gas remain fundamental to the global economy.
- Green energy will rely on oil and gas for the foreseeable future.
- Mineral rights can be both a stable and lucrative investment choice.
Oil and Gas Industry Outlook
We are still completely dependent on oil and gas for energy. For example, the transportation sector depended on petroleum to provide 90% of its energy in 2020. What’s more, the U.S. Energy Information Administration forecasts that global liquid fuels consumption will grow by a whopping 5.3 million barrels per day (b/d) in 2021 and an additional 3.7 b/d in 2022. The thing that no one is saying out loud? That’s more than 2019 levels.
Oil and Gas Are Embedded into Everyday Life
Now think about your own daily life. You probably drive a car to and from work, heat and cool your house, turn your lights on, cook with an electric or gas range… Where does all that power come from? Do you think it’s possible for U.S. infrastructure to simply flip a switch and change from oil and gas to renewable energy sources overnight? We don’t think so.
Professional Investors Are Still Betting on Big Returns
And turns out, we’re not alone in our estimate. When Warren Buffett announced his deal to buy into Dominion Energy’s natural gas assets last year, he made a big-time bet to the tune of $9.7 billion that natural gas has a long future, despite plans from the White House to make renewables the talk of the town.
The Rise of “Green” Energy
Yes, we absolutely should embrace green energy and its lower carbon footprint for the health of the planet. But does that mean shutting off all oil and gas production completely? Nope, not by a long shot. Lots of green energy solutions depend on oil and gas.
Green Energy Still Depends on Oil and Gas
Let’s take electricity, for example. Many people think of electricity as clean energy. But electricity is a secondary energy source that is produced from other sources like coal or natural gas. So just because something is “electric” doesn’t necessarily mean it’s going to completely replace fossil fuels, at least not anytime soon.
Demand for OIl and Gas Could Go Up BECAUSE of Green Energy
We’re going to tell you the truth that no one wants to say: when progressive politicians and journalists talk about “deep electrification” (e.g. making all vehicles electric), that could drive U.S. electricity demand to increase as high as 65% by 2050. And again, electricity is produced by coal and natural gas (natural gas being the cleaner option).
And since wind and solar power are intermittent energy sources, what energy source do you think is most likely to serve as a backup reserve? People and organizations will have to choose between low-cost gas and high-cost batteries. We’re still betting on the low-cost option.
Green Energy Will Take Time to Develop and Distribute
Furthermore, how will all the wind and solar power even make it to the densely populated areas that need it? Long-distance transmission lines will need to be built, but before that, they’ll face regulatory hurdles that take time, money, and effort to overcome.
By all means, green energy efforts like wind and solar should be expanding. We all want lower greenhouse gas emissions and lower air pollution. We also want more innovation, an infrastructure and manufacturing boom, and less dependence on foreign fuels. The oil and gas industries can work in tandem with green energy to create a strong and sustainable future for the U.S. and the world.
Mineral Rights Investing
Investing in mineral rights is still a lucrative, long-term strategy based on demand. Oil and gas supplied 69% of energy in the U.S. in 2020, and its use is not going down fast. Petroleum products alone are used in almost every one of today’s consumer products, from vehicles to heat in buildings. It’s also used to produce electricity, and to make products like plastics, polyurethane, solvents, and lots more.
You might also be wondering what will happen in the future. After all, most savvy investors are interested in long-term gains as well as short-term returns. Well, the U.S. Energy Information Administration is pretty clear. By 2036, U.S. liquid fuels are expected to return to 2018 and 2019 levels of consumption and then increase gradually until they reach 36-38% of total annual U.S. energy consumption by 2050.
When you consider all the incredible innovation that’s taken place in the past two decades, the oil and gas industry is primed for investors. The fracking revolution, dramatically lowered CO2 emissions and various net-zero LNG ventures like Shell and BP’s all promise that the oil and gas industry can and will grow to meet the world’s demands for cleaner energy while still producing profit for investors.
And let’s talk about the profits. While the “green” energy companies are busy trying to get off the ground, investing in mineral rights can mean earning almost immediate royalties of 12.5-25% of the revenue produced by those minerals.
How This Relates to Money
If you’re an investor, you already know how to choose your investments well. You probably look for earnings growth, stability compared to the overall market conditions, the strength of the industry, and liabilities.
For the right individuals, mineral rights investing can meet all of those financial strategies and more. And considering the industry is over 150 years old, minerals rights is a tried-and-true investment strategy.
Contact us to learn more about opportunities to invest in mineral rights.