What is green oil?

Green oil refers to oil that is derived from crops, normally from the seeds of plants such as Oil Palm, Millettia and Jatropha. These are all fast-growing plants with oil rich seeds which may begin to be harvested within just a few years of planting.

When harvested, seeds can be pressed to produce oil which can then be used as a bio-fuel to generate heat and electricity, as an organic fertiliser, or as a base for animal feed both of which are not as lucrative when compared to using it as a fuel.

Green oil is far from a new innovation. These plants (and many others) have been used for oil production on a local level for many, many generations. However, with the problems that now surround conventional oil (fossil fuel) extraction, green oil is being seen increasingly as a sustainable and valid alternative and large, industrial scale plantations, and processing plants, are springing up across the globe.

Green oil investment

Why invest in green oil?

Apart from the obvious ethical connotations of investing in green oil there are good economic ones too.

The price of green oil is governed by three main factors:

  • An increase in the demand for energy; the demand for energy has always followed an upward curve. However, with the emergence of China and India as industrialised, consumer driven nations, energy demand is expected to soar. In 2009 the International Energy Agency predicted that demand would increase by 840% by 2030 (based on expected oil demand);
  • A reduction in the supply of fossil fuels; The peak in oil investment is imminent if it has not already passed. Nearly all of the easily extracted oil has already been taken. Future supplies of fossil fuel oil will come from harder to reach reserves in inhospitable environments. Extraction will become more expensive and availability will fall;
  • Government set targets; an important factor to consider when thinking of investing in many alternative or green technologies is that the industry is supported by government targets for reduced greenhouse emissions and renewable energy sources. EU member states are committed to producing 20% of their energy from renewable by 2020, and similar targets are now common around the world. This has been evidenced by huge expansion in all green energy sectors, including bio-fuels.

How to invest in green oil

Traditionally investment in new technologies, including green oil, has remained the domain of institutional investors who had the resources and wherewithal to establish and manage overseas plantations. With the current climate surrounding banking however, banks have become less likely to invest in new projects and project developers are now looking further afield for investment creating new opportunities for the small investor. There are a wide range of projects available at many different entry levels. As with all investments it is essential to research thoroughly if your investment is to be successful.

What to look for in a good green oil investment project

  • Products that are SIPP approved. ‘HMRC approved’ does not mean too much as HM Revenue & Customs allow SIPPs to invest in a very wide range of investments;
  • A fixed term, or a clearly defined exit strategy;
  • More than one crop (this reduces the risk of crop failure due to disease or weather conditions);
  • Insurance on the crop against storm damage, blight etc;
  • A lease, or title, to the land;
  • A fixed annual payment based on forecasts of yield and costs.

Quite often these schemes are not regulated by the Financial Services Authority (FSA) and as a UK investor you would not be covered by Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS). However if a UK regulated independent financial adviser (IFA) was the one to recommend investing in a certain investment you may have recourse against that individual if their advice turned out to be poor as they are subject to UK regulations.

Of the many green investments, green oil has many positives but some negatives. However, using green oil as a replacement for fossil fuels is on the increase. We also discuss ethical investments such as timber, teak, forestry and bamboo.