Oil is something that’s become synonymous with vast amounts of wealth. If you look at sports teams from around the world, they’re often owned by billionaires who made their fortune in the oil industry.
However, an article earlier this year by The Economist suggests that oil is no longer the world’s most valuable resource. This begs the question; is the oil industry still a profitable place to start a business?
Let’s take a look at this question by discussing some of the main factors at play when starting an oil mining company.
Setting up a company is costly
What puts a lot of people off this idea is the fact it costs so much to set up and run. An oil business is nothing like a typical office business where you have limited overhead costs. Here, you need the drilling equipment, a pipeline system for the oil to run through, transportation, heavy machinery; the list is endless. It raises your costs, meaning it’s even harder to make a profit.
There are ways you can attempt to lower the expenses as much as possible. Places like Varner Pipe sell used piping that’s cheaper and just as effective as the new stuff, this can save a little cash. Renting your equipment instead of buying it can save money too – there are some solutions to this problem.
Lots of trial and error involved
In an ideal world, you’ll pick a mining location and find loads of oil that make you millions. Unfortunately, it doesn’t always work like this, there’s a lot of trial and error involved.
Sometimes, you might not find much oil in one place and have to pack everything up and find somewhere new. This can mean wasting lots of money mining in one location to receive hardly any reward for all your work.
Oil is still in demand
While it might not be the world’s most valuable resource, oil is still in demand and used throughout global industries. We still need oil for our car engines, or for other transport fuel too. We’re yet to get to a point in society where every mode of transport is 100 per cent sustainable and is run by electric engines.
There are still plenty of uses for mined oil, so there are still plenty of potential buyers for what remains an expensive product. With that being said there’s still the potential to make a lot of money, it all depends on how lucky you are and where you choose to mine for oil.
So, does this mean the oil industry is still a profitable place to start a business? The truthful answer is yes because there are still plenty of companies making a profit right now.
However, it’s certainly harder than it used to be. Overhead costs weren’t that big of an issue when oil was the number one resource in the world. Normally, you’d be confident of finding oil and earning all the costs back.
These days, as oil resources go down, there’s more trial and error involved, meaning it’s harder to make a profit. As far as small business ideas go, it’s not a good one. But, as a big business idea with plenty of financial backing, you can still make a load of money.