Many investors have become disillusioned with the traditional investments available to them through traditional channels. More and more investors are looking for ways to invest their retirement dollars for a larger more consistent and safer return. The problem is knowledge and investment tools. The investor armed with a self-directed IRA and investment knowledge will certainly earn far more in his portfolio. Oil and gas certainly has very good potential for the IRA holder beyond stocks in the large oil companies burdened with huge overhead constraints.
When conducting your due diligence on a company that drills for oil and gas to determine if it is a good investment, it is just as important to research the current market trends. Investigating into the investment of oil and gas provides a very clear picture of supply and demand. The effects on these resources are far reaching from the gas pump to the milk container.
Currently, Americans consume more oil and gas than the U.S. has in natural resources. As a result, this places a high demand on foreign sources of oil and gas subsequently, the price of oil and gas are driven higher. In recent history, oil prices were at $28 per barrel compare that with today’s oil price of $58 per barrel, the return on investment (ROI) for an investor is potentially incredible. Other global, environmental and political pressures have influenced prices. These influences are as follows:
• China and India, the most populated countries in the world, have become increasing their demand for oil because of each the country’s increased growth in population and economies.
• The U.S. is currently at full capacity for refining process (refining is the processing of crude oil into a usable form) of crude oil that comes and there are currently no plans to build additional or more efficient refineries.
• The legislation of the past administrations have also placed strains on the processing industry as further requirements increase the cost of refining. This also put s an enormous strain on supply and the result is higher oil prices.
• Natural disasters such as hurricanes may also cause an increase in prices especially since a large portion of the refineries are located in the Gulf Coast region. The effect of these trends will likely increase current pricing and future pricing. Another hurricane with the power of Katrina will likely cripple our fuel supply. And given the current weather trends that is a very likely occurrence.
Not surprisingly, there are financial analysts who have predicted oil prices to go beyond the $100 per barrel milestone in the near future. Because of the pressure of these high prices and changes in drilling technology, many drillers are exploring more areas within the United States to drill for oil and gas.
A Self-Directed IRA provides the investor with the ability to invest in direct participation or in whatever position is most important to the investor. A Self-Directed IRA with checkbook control provides even greater control and ability to move upon opportunities when they arise. Of course, the gain is tax-deferred just as it would be if stock or a mutual fund were purchased.
Copyright 2006 © Daniel Cordoba, CEA
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Daniel Cordoba is a Certified Estate Advisor and Principal of Asset Exchange Strategies, LLC. Asset Exchange Strategies, LLC (www.MyRealEstateIRA.com) helps investors gain greater control over their self-directed IRAs.
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