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The “transition to green energy” narrative has dominated headlines for some time now. The energy landscape is shifting dramatically, and while challenges exist, they’ve created unique openings for investors to benefit from a sector that remains absolutely vital to global stability and growth.
Challenging the Fossil Fuel Narrative
There’s a lot of talk these days about the world moving away from fossil fuels. For instance, the International Energy Agency (IEA) predicts a 25% drop in fossil fuel demand by 2030 and an 80% drop by 2050. They’ve even suggested there’s no need for new investment in oil, gas, or coal projects. These projections may grab headlines, but they overlook some key realities.
Fossil fuels made up 81% of global energy usage in 2023, and after 50 years of renewable energy expansion, oil still powers 91% of global transportation. Why? Oil’s high energy density makes it incredibly difficult to replace. As much as renewable energy is growing, the infrastructure and technology to fully phase out fossil fuels simply aren’t there yet—and won’t be for decades.
Declining Oil Investment
One of the biggest drivers of today’s energy crisis is the steep decline in oil and gas investment. Since 2014, investments in new projects have dropped by 55%. This pullback stemmed from assumptions about declining demand and a rush to prioritize renewable energy. While renewables are essential, the sudden drop in oil investments has left global supplies short — and that gap is growing wider every year. This means oil and gas investments could see substantial appreciation as the market adjusts to supply shortages.
Market Signals: Why Timing Matters
Oil intensity is the measure of how many barrels of oil does it take to produce $1,000 of Real GDP.
Oil markets are facing a growing supply-demand imbalance, creating a strong case for investment. The U.S. Strategic Petroleum Reserve (SPR) is at historic lows, and new oil production is limited as companies prioritizing shareholder returns over expansion. Meanwhile, global supply is tightening as OPEC depleted its spare capacity, adding price volatility.
J.P. Morgan Research estimates oil markets could face a 1.1 million barrel per day deficit in 2025, widening to 7.1 million by 2030. This imbalance could drive prices to $150 per barrel in the near term and $100 over the long term. Demand is still rising, and renewables cannot fully meet global energy needs. Currently, the market is in a state of equilibrium, but it’s not predicted to stay that way. This means that now is a key moment for investors to fill this gap and capitalize on these trends.
In spite of the challenges, the fundamentals of oil and gas are as strong as ever. Demand is rising, supply remains structurally constrained, and geopolitical instability only highlights the importance of this sector. Strategic investments in well-managed energy projects can offer both strong cash flow and growth.
Ways to Invest in Oil & Gas
Mineral Rights and Royalty Interests - You can purchase the mineral rights of land, which entitles you to a share in the revenue from any oil or gas production on the property. When a producer leases the land, royalties — typically 15-25% of the gross production value — are paid to the mineral rights owner.
- Pros: Owners are not required to make any capital expenditures or taxes on the land.
- Risks: There's no guarantee a producer will develop the land, which could leave the rights unutilized for decades.
Working Interests - Working interests offer a deeper level of involvement. Here, you share in both the costs and the profits of drilling and production. It’s a partnership with operators who handle the dayto-day work, but you’re along for the ride. It’s not for the faint of heart, but for those who thrive on calculated risk, the potential payoff is substantial.
- Pros: This path can lead to significant rewards if the wells
produce. - Risks: Exploration and development are costly, and
setbacks like dry wells or budget overruns are common.
Non-Operated Working Interests - Non-operated working interests delegate operations to a third party, often a major industry player with advanced technology and expertise.
- Pros: Reduced operational responsibility and access to
experienced operators. - Risks: While operational risks decrease, investors remain
exposed to commodity prices and production challenges.
Midstream and Downstream Investments - Oil and gas investments don’t stop at drilling. Midstream opportunities, like pipelines and storage facilities, and downstream ventures like refineries and distribution centers, offer more stability. These projects are often less volatile than exploration, making them a good fit for investors seeking steady returns.
Aspen Funds's Approach to Oil & Gas Investing
When it comes to oil and gas, Aspen Funds knows that the stakes are high, but so is the potential. That’s why they’ve built their strategy on three core principles:
- Investing in Proven Assets: Aspen focuses on fields with established production and cash flow. This reduces exploration risks and provides a foundation of stability.
- Operational Excellence: They only partner with experienced operators who know how to maximize production and keep costs
under control. - Maintaining Low Leverage: By avoiding excessive debt, they protect your investment from market volatility and keep the fund financially flexible.
Aspen Funds's latest venture, the 51 Upstream Energy Fund VII (UEF VII), is designed to take advantage of the opportunities in the oil and gas sector while managing invested funds with care, precision, and a focus on growth.
UEF VII is all about targeting oil and gas assets with proven production and strong cash flow. They’ve intentionally structured this fund to prioritize both capital preservation and long-term growth. By teaming up with seasoned operators and keeping leverage low, they aim to minimize risks while delivering attractive returns for their investors.
About Aspen Funds:
Aspen Funds provides an avenue for private, passive real estate investing that offers better returns and lower volatility than the stock market. With $600 million in assets under management, more than $250 million in investor capital managed, and over $65 million in investor distributions over 11 years, Aspen Funds offers private funds for accredited investors to pursue alternative investment strategies. Learn more about Aspen Funds here.
Disclaimer:
The views and opinions expressed in this blog post are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
