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There are risks associated with investing in oil and gas ventures. The above information is for general purposes only and is not a solicitation to buy or an offer to sell any securities. General information on this site is not intended to be used as individual investment or tax advice. Consult your personal tax advisor concerning the current tax laws and their applicability and effect on your personal tax situation.
The US Energy Boom Is An International Opportunity
The international oil and gas market is the most globally integrated the world has yet seen. A major disruption at any point in the “stream” from oil derrick to gas pump will ripple outward in the form of volatile prices that can change the fate of nations, or more precisely their governments. Within the international energy market the most important commodity is undoubtedly oil; its role in every major economy is as blood to the human body. Record supply and production totals are being set each year, but the increasing energy demands of the world’s emerging economies create a floor for oil prices that is unlikely to yield. It is simply a given that the global demand forecast for the coming years threatens to overtax global production and drive prices even higher.
The market fundamentals of supply and demand are only part of the energy picture, however, because more than any other business, energy production is controlled and restricted according to sovereign needs and policies. All nations, especially as most are both producers and exporters of energy commodities, engage in a form of protectionism that can best be described as Resource Nationalism, i.e. the pursuit of energy policies which are most advantageous to the nation whose resources, be they industrial or natural, are being selectively monetized for political reasons.
It is well known that the majority of global oil supply originates in countries that can be fairly termed politically unstable. Recent events in Iran, Venezuela, Libya et al. have shown that with respect to unstable countries like these no investment partner, whether it be a huge multinational oil company or a sovereign investment fund can be assured that their investment will be protected. Private investment in oil production is simply not advisable in most parts of the world and certainly not desirable long term due to the likelihood of political instability and/or nationalization.
With these problems in mind, the international investor who wants to profit from direct participation in the oil and gas industry must find the proper environment to invest in. A nation with strong legal traditions to protect the investor is obviously important, along with a government that is actively supportive of both foreign direct investment and increased energy production.
The United States is arguably the only country that can claim to meet those conditions.
The time tested US corporate model in the form of a limited partnership, which is typical for oil and gas investment, is an eminently safe and reliable investment vehicle with which to conduct international business.
The US political climate is highly favorable to the increased exploitation of natural resources, specifically oil, as it is seen as a remedy to high unemployment and as a means of reducing dependence on imported oil.
The regulatory easing that follows from this political posture is likely to continue, ensuring that oil and gas investors will have an excellent chance to profit further as the US economy recovers and higher growth rates lead to increasing calls for more energy infrastructure.
These facts taken together point to a unique opportunity for foreign investors seeking to acquire income producing assets in the unsinkable energy market.