It’s been called black gold, Texas tea, or simply crude. Since its first discovery in 1543 in the Americas by the Spanish explorer Luis de Moscoso, the oil industry has grown to become a foundation of the American economy and has influenced the development of our society and culture.
In America, oil is a huge business. Despite recent trends moving away from fossil fuels, oil still dominates America’s energy market. In fact, as of 2018, the American oil and gas industry produced a total of $181 billion in revenue, far surpassing any other energy industry.
As an advanced nation and the world’s biggest economy, America is very much dependent upon oil and gas. The figures clearly show this dependence. For example, in 2020, American consumption of petroleum was approximately 18.12 million barrels per day, which amounted to a year-end total of approximately 6.63 billion barrels and represented approximately 8% of America’s GDP.
The United States is dependent on oil for two main reasons. First, numerous products that are part of our lives are dependent on oil. Motor cars, planes, trains, paint, clothing, sporting equipment, and even solar panels all need oil to function. Industry and mechanical instruments also rely on oil.
The second reason for our dependence on oil is the massive size of the oil industry itself. Without it, the American economy would collapse. The oil industry is big not only in terms of production and consumption but also in terms of the number of people it provides employment for. For example, in 2019, the oil and gas industry directly employed approximately 142,000 people. Analysts further estimate that the oil and gas industry indirectly supports 10.3 million jobs.
American oil and gas statistics
The oil and gas industry is a cornerstone of the American economy. This is clearly shown by the following statistics.
- The United States is the world’s top crude oil producer. In 2020, it produced 11.3 million barrels per day.
- The United States produces approximately 19% of the world’s crude oil production.
- In 2020, the United States averaged a consumption rate of approximately 18.12 million barrels of petroleum per day.
- The oil and gas industry generated a net profit of $4.06 billion in 2020.
- Statistics show that as of November 2020, 83.8 thousand people were employed in the oil and gas industry.
Benefits of the American oil and gas industry
The oil and gas industry has reaped numerous benefits for the country. It has created a significant number of jobs. In addition, it continues to generate revenue, which contributes significantly to the American economy. The oil industry is heavily taxed, boosting the economy. More importantly, oil is essential to our day-to-day lives, as we use it to propel vehicles, heat buildings, and produce electricity. Furthermore, we need oil to manufacture user end goods, such as plastics, polyurethane, and solvents.
Investing in the oil and gas industry
The oil and gas industry has consistently offered high returns. Certain factors influence the price of oil, including drilling costs, equipment costs, labor costs, and sales of products in associated industries. Despite these numerous influences, the oil and gas industry has proven quite resilient and has provided investors with comparatively consistent returns.
Arguably the best approach for investing in the oil and gas industry is to diversify. This means investing in numerous oil wells and in the different stages of the well operations. Put another way, investing in the exploration stage as well as the operation stage is a good way to ensure that you are getting your desired returns.
The oil and gas industry also offers investors very attractive tax breaks. For example, in the oil and gas industry, all costs associated with drilling, including labor and mechanical costs, are up to 100% deductible.
One of the advantages of investing in the oil and gas industry is that it offers long-term return potential. Wells are often in production for 10 years or more, which entails a decade-long passive income for the investor.
Making investments in the oil and gas industry can produce the same advantages as an annuity investment but without the downside of annuities. Like an annuity, an investment in the oil and gas industry can provide consistent returns. With most annuities, the investor has to pay premiums for an extended period before receiving any returns. In contrast, oil and gas investment companies will often pay returns after only a few months.
Investors in the oil and gas industry can have direct asset ownership. Hence, they can own the actual physical oil wells as opposed to just owning stock in an oil company. Oil is always in demand, as people and other industries heavily rely on it. Therefore, it would be good to grab any opportunity to invest in this virtually indispensable resource.