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Options for Investing in Oil, Gas and Mineral Rights

Updated on January 9, 2018
tamarawilhite profile image

Tamara Wilhite is a technical writer, industrial engineer, mother of 2, and a published sci-fi and horror author.

Introduction

What are your options for investing in oil, gas, minerals and mining without speculation? How can you invest in the mining and resource extraction sector without speculating?

Buy Energy Sector Stocks

American investors can buy shares of leading oil and gas producers XTO Energy, Andarko Energy, Exxon Mobil, Chesapeake Energy, and Chevron among others.

To invest in the oil sands in Canada, investors can buy shares of Suncor Energy. It is unfortunate that many of the largest oil producing companies are owned by their countries instead of being publicly traded companies. Fortunately, there are other options for investing in oil and gas.

Invest in the companies that supply energy producers to profit from their work with less risk than holding energy stocks themselves.
Invest in the companies that supply energy producers to profit from their work with less risk than holding energy stocks themselves. | Source

Invest in Suppliers to the Energy Industry

During the California Gold Rush, a few miners got rich. These were the early comers, while late-comers barely broke even or lost money. Yet many of those who provided supplies for the miners did get rich, with Levi Strauss being the most prominent example. Individual oil producing companies can suffer set-backs that hurt the value of their stocks. Yet those who supply critical items to the oil and gas industry will continue to turn a profit as long as there are any major players in the industry.


Oil must also get from the field to the refinery. Another strategy for investing in oil is investing in oil pipeline manufacturers. Possibilities include American Piping Products, DeepFlex and OneSteel though many smaller manufacturers exist for those seeking investment opportunities. Discover which companies that are building new oil and natural pipelines in your area. Find out which firms received contracts to build major new pipelines like the Keystone XL pipeline for investment opportunities.

Invest in Land or Mineral Rights

When oil is pumped out of the ground in the United States, royalties are paid to the individuals or companies that own the mineral rights to the land. Speculators can buy land that will be developed for oil production.

Research land trusts. Land trusts consist of investors pooling their money to buy either land or the mineral rights for the land before seeking drillers for the oil or gas. Enterprising individuals can buy the mineral rights from farmers and ranchers before selling those mineral rights to the drillers. Land trusts have the benefit of diversification, buying the mineral rights or property at a dozen locations. If one site goes bust or runs dry, the others should continue to produce.

Invest in Oil Refiners

Many oil refineries are owned by oil producers like Exxon Mobil and British Petroleum. However, other refineries are owned by other companies. Among the top 30 refineries in the United States are names like WRB Refining, Deer Park Refining Limited Partnership, Chalmette Refining and Delaware City Refining Co. Buying refinery stocks shields investors from the ups and downs of one oil producer while generating profits as long as the refinery is running. Tesoro Corporation, Motiva Enterprises, Access Industries and Koch Industries run refineries among the top 30 in the U.S.


Some companies control large sections of the oil and gas supply chain. Sunoco, Valero, Exxon Mobil and Citgo all run refineries and sell gasoline to the public. Buying shares of these companies allows investors to profit from gas sales as well as non-gas purchases at these locations by the public. The benefit of buying stocks in these companies is profiting whether someone stops to buy gas or ethanol or just makes a quick stop for coffee and a car wash.

Invest in Energy Sector Mutual Funds

Sector mutual funds invest in stocks related to a specific economic sector such as medical stocks or financial industry stocks. Energy sector mutual funds provide investors a way to invest in oil and other energy producing companies while retaining liquidity and diversification.

A long term benefit of sector mutual funds is that they can invest in oil, natural gas, bio-gas, ethanol, nuclear power plants, trash incinerators and other forms of power generation. The diversity of energy sector investments means that those holding energy sector mutual funds can profit from oil and gas stocks today and investments in future energy sources for the long term.

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