In the ever-changing landscape of investment opportunities, sometimes the most lucrative prospects are found where others aren't looking. As we navigate through 2025, one such overlooked gem might be right under our noses — or, more accurately, under our feet.
You've heard it a thousand times: "Buy low, sell high." It's the mantra of successful investors worldwide. But in today's market, with years of gains priced in, where can we find that elusive "low" with the potential to soar?
The answer might surprise you: the energy sector, specifically oil and gas investments within qualified opportunity zones (QOZs).
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Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.
Now, I know what you're thinking. "Oil and gas? In 2025? Aren't we moving toward green energy?" Yes, we are — but not as quickly as some might have believed.
The reality is that our world still runs on fossil fuels and will continue to do so for the foreseeable future. This disconnect between perception and reality is creating a unique investment opportunity.
Let's break it down
1. Market undervaluation. The energy sector lagged in 2024, with many investors shying away due to environmental concerns and the push for renewables. This led to depressed valuations across the board, from exploration companies to midstream operators.
2. Technological advancements. The oil and gas industry isn't stagnant. Innovations like hydraulic fracturing and horizontal drilling have revolutionized production capabilities. The U.S. has the potential to be a net energy exporter, a scenario that was unthinkable just a decade ago.
3. Ongoing demand. Despite the buzz around electric vehicles and renewable energy, global demand for oil and gas continues to grow, not shrink. The transition to green energy is happening, but it's a marathon, not a sprint. The simple truth is, the world is likely to always have a need for oil and gas.
4. QOZ tax benefits. Qualified opportunity zones offer significant tax advantages, including deferred capital gains taxes and potential tax-free growth if held for at least 10 years.
Why these QOZ funds are so interesting
Now, let's talk about why QOZ funds focused on oil and gas are particularly intriguing.
First, many QOZs are located in areas rich in energy resources. Texas, Pennsylvania and Louisiana — all home to major oil and gas fields — have multiple designated opportunity zones. This geographical alignment creates a perfect window of opportunity.
Second, the structure of QOZ funds aligns well with the capital-intensive nature of oil and gas projects. These funds must deploy capital quickly and maintain most of their assets in qualified properties — a natural fit for energy infrastructure investments.
Last but not least, the 10-year holding period required to maximize QOZ tax benefits matches the long-term nature of energy investments. Oil and gas projects often take years to develop and reach peak production, aligning nicely with the QOZ timeline.
What are the risks?
But what about the risks? Sure, they exist. There's no such thing as a risk-free investment. The push toward renewable energy is real, and regulatory changes could impact the industry.
However, these risks are largely priced into current valuations, creating an attractive risk-reward profile for savvy investors.
Moreover, the transition to green energy just isn't as straightforward as it might seem. Electric vehicles, often touted as the future of transportation, come with their own set of challenges, from rare metal mining (an environmental nightmare) to electricity generation (which remains largely dependent on fossil fuels, especially coal).
The reality is, oil and gas will play a crucial role in our energy mix for decades to come.
As a financial adviser based in Texas, I've seen firsthand the explosive potential of oil and gas investments. I've also witnessed the transformative impact of QOZ investments on local communities. Combining these two powerful forces could not only yield significant returns but also contribute to economic development in underserved areas.
Of course, like any investment, due diligence is crucial. Not all QOZ funds are created equal, and the specific focus of an oil and gas fund can greatly impact its risk-and-return profile. It's essential to thoroughly research any fund's strategy, management team and track record before investing.
Contrarians, take note: While the crowd chases the next big tech stock or cryptocurrency, savvy investors might want to look toward the oil fields. QOZ funds focused on energy present a unique opportunity to potentially benefit from both tax advantages and the long-term prospects of an essential industry.
Successful investing often means having the courage to zig when others zag. In 2025, as the energy sector lags and QOZ funds offer unprecedented tax benefits, that zag might just lead you to strike oil. The oil and gas sector within QOZs could be a classic overlooked opportunity, offering a chance to truly "buy low" with the potential to "sell high" down the road.
Related Content
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- Opportunity Zone Investing Still Hot Despite Looming Sunset
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