Are oil companies still a good investment?

Oil companies are still a good investment despite the rising tide of green energy. The oil and gas industry is still profitable for investors because of the limited number of players in this space that can produce at scale. Investors who want to allocate capital to a company with an attractive risk-reward profile should consider investing in oil for these 12 reasons.

1. Oil Continues to be Used for Transportation

Although electric cars are becoming more popular, they still aren't practical for many people. Electric charging stations are not yet available everywhere and refueling takes much longer than it does with gasoline. Oil is still king of transportation. The next generation may very well choose alternative energy, but that isn't the current reality, which is why oil companies will continue to be hugely profitable.

2. Oil is in Everything

Did you know that oil is used to make things like asphalt, food packaging, paints, and fertilizer? Yep, it's true. Oil has many different uses and will be around forever. There are few, if any, companies that can match an oil company in its reach and diversity of products, especially when you consider how far down the supply chain you can go.

3. The Industry is Already Diversified

Most oil companies have branched out and become vertically integrated so they can increase profits and decrease their vulnerability to political issues and swings in the oil market. The industry has also developed expertise in alternative energies such as biofuels, solar and wind power so this will be another source of revenue if more people turn to alternative energy sources.

4. Oil Companies Are Large

If you want to make a lot of money, consider avoiding small oil companies. Their stocks will be more volatile and might never get off the ground. Investing in larger, established companies with long track records of success is the way to go if you're looking for consistent returns.

5. Repeated Shocks Have Been Weeded Out

There have been many different shocks to the oil industry over the years, but they don't seem to affect prices as much nowadays. This is because most of them have been weeded out, with only a few left that really matter. Instead of worrying about gasoline shortages, tax changes, and other things, you can focus on the fundamentals of what drives stock prices.

6. Solar Energy Isn't Cheap

Solar panels have been around for a while now and they're becoming cheaper to produce. But in order for solar energy to compete with oil, it needs to get even cheaper. The reason oil is so popular is because its price has remained stable for years. The same cannot be said about other forms of energy, which makes investing in oil companies an attractive choice for long-term investors who aren't looking for short-term gains.

7. Oil is Cheap to Find

The world's oil supply hasn't dried up, which means the industry continues to operate without any major problems. Oil companies can easily drill for it and pump it out of the ground with very little effort, making it one of the cheapest forms of energy to acquire. Solar energy needs hours of sunlight in order to produce small amounts, which makes it expensive to produce. This gives oil companies a huge advantage over solar energy providers.

8. Oil is Cheap to Refine

Once oil is pulled out of the ground, it needs to be refined before it can be used. The refining process isn't very complicated or costly and many companies are capable of doing it. If you can produce money at the beginning, you stand to make a lot of it when you produce refined oil for cheap.

9. Other Forms of Energy are Costly

You might have heard about wind energy or other alternative forms of energy, but they don't compare to solar and oil when it comes to how much money can be made. Even if there was a way to make money off of them, they'd still be more expensive than other forms of energy.

10. The Industry is Well-Regulated

Politicians and government agencies closely monitor the industry to make sure it follows ethical standards. If you're concerned about investing in a company involved with human rights violations or environmental destruction, an oil company isn't the place to start.

11. Oil Companies Have a Long History

Some people forget that oil companies have been around for many years and weathered many different types of storms. This should give investors peace of mind as long as the past is any indication of what might happen in the future. Wind and solar energy have been around for a while as well, but they haven't offered the same type of long-term returns that oil companies have.

Green energy will be great someday, but oil isn't going anywhere soon

Global demand for oil continues to rise every year and renewable forms of energy have a long way to go before they can match up to it. Investing in oil companies is a great idea for investors who don't need large amounts of money right away, or who aren't good at predicting things like economic growth. It also makes sense if you think the world population will continue growing and demand for oil won't slow down any time soon.

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(Disclaimer: This post does not constitute financial advice. Do your own due diligence before making an investment.)