January 3, 2012
http://seekingalpha.com/article/317065-oil-prices-rose-19-in-2011-another-sign-that-a-nuclear-renaissance-is-inevitable
Oil prices rose 19% over the course of 2011, the third consecutive year marked by a rise in the price of oil. Below is the monthly chart of Brent Crude Oil that illustrates the clear uptrend.
While currency devaluation, geopolitical tensions, and speculators are all forces that may be contributing to rising oil prices and greater market volatility, a growing factor that suggests the price rise will continue is the supply/demand imbalance in the oil market. In other words: demand for oil and other fossil fuels is only growing, but the supply of them is diminishing. The chart below illustrates.
While I believe the world will likely be using fossil fuels as a primary source of energy for some time, we are clearly at a point where a new source of energy is needed. I believe nuclear energy is the primary candidate destined to grow, for the following reasons:
1. It can provide "baseload" - meaning always on - energy
2. It is emission-free
3. It has high power density, which means it does not require an inordinate amount of land and thus is conducive to powering cities
4. It is inexpensive
No other source can really make these same claims. Wind and solar are much more expensive and cannot effectively provide baseload energy, which is precisely why they remain insignificant sources of power on a global basis. Technological breakthroughs may change this, though I don't see this on the horizon, and believe renewables will have limited roles in the global energy market until this changes.
And so, the rise of nuclear energy is virtually inevitable -- the world will demand it for survival. Accordingly, China already has 25 nuclear power plants under construction, and realizes that nuclear will be a key part of how its nation is powered as it increasingly urbanizes. Investors can recognize China as the "smart money" -- the force driving the market's demand and sending prices higher -- in the nuclear energy market.
Of course, this transition will not occur overnight - nuclear power plants take a long time to build - and so oil, coal, and natural gas will continue to play an important role in providing energy to the world. Investors will need to be patient, as this market may take up to a decade to really get going. The value network is still developing and much depends on how government participates and regulates the market, as well as what innovations entrepreneurs will develop as the market grows.
For now, the investment opportunity is simple: uranium. Nuclear power is most easily obtained through processing of uranium, and so uranium mining firms are the buy and hold opportunity for patient investors looking to participate in the nuclear renaissance. Uranium ETFs like URA as well as mining companies like Uranerz (URZ), Uranium Energy Corporation (UEC), and Cameco (CCJ) are plays that make sense from this perspective, with UEC being my favorite due to the adept leadership of its Amir Adnani - its founder and CEO with a background as a serial entrepreneur with a marketing focus - as well as the firm's focus on ISR mining which I regard as an enabling technology that will allow UEC to experience lower mining costs than traditional open pit mines.
As compelling as the uranium story is, I cannot overemphasize the need for patience. Nuclear energy is still not appreciated and the entire energy market is poorly understood. This represents a great opportunity for the educated investor, provided they have patience and conviction, and understand the economics of nuclear is really the only option barring some type of technological breakthrough that currently is nowhere in sight. As always, investors will find it to their advantage to focus on the actions of the smart money - which in this case is China - while ignoring short-term sentiment factors like the concerns about nuclear energy stemming from the Fukushima crisis.
While uranium remains the mineral to invest in and focus on, investors should also keep an eye out to see how Thorium develops. Thorium is a potential substitute for uranium in the production of nuclear power, and possesses less of a radiation risk - a common criticism of uranium. However, the value network for thorium is a bit undeveloped at the moment, and it does not appear that there is yet a "smart money" faction that can push prices higher. Thorium is also more a more expensive way of generating nuclear power, an obstacle I suspect will need to be overcome if thorium is to become a serious opportunity for investors looking to invest in the nuclear renaissance.
So get ready for a whole new energy paradigm as we move away from oil. Understand, though, the process will take time, and that the science and economics suggest the opportunity is nuclear energy unless there is some type of a big technological breakthrough. And of course, patience is your friend; while the economics will, as always, ultimately dictate what happens, the process can be slow. China is the one to watch, and so long as they are committed to the market, any sell-offs in opportunities to invest in nuclear energy, namely via uranium mining firms, constitute an opportunity to buy the dip.
Disclosure: I am long UEC, CCJ.
Recent MGA News
- Magna Announces 2024 Annual Meeting Results • GlobeNewswire Inc. • 05/09/2024 10:00:00 PM
- Magna Announces First Quarter 2024 Results • GlobeNewswire Inc. • 05/03/2024 09:00:00 AM
- Magna Wins 2024 Automotive News PACE Award, Receives PACEpilot Recognitions • GlobeNewswire Inc. • 04/30/2024 05:38:20 PM
- Serve Robotics Enters Production Agreement with Magna to Scale Robot Manufacturing • PR Newswire (US) • 04/24/2024 12:00:00 PM
- Magna Announces Date for Q1 2024 Results Call • GlobeNewswire Inc. • 04/15/2024 10:00:00 PM
- Magna Posts 2023 Annual Report • GlobeNewswire Inc. • 03/28/2024 09:26:07 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 03/11/2024 05:58:06 PM
- Form SUPPL - Voluntary Supplemental Material by Foreign Issuers [Section 11(a)] • Edgar (US Regulatory) • 03/07/2024 10:08:28 PM
- Serve Robotics Inc. Common Stock to Be Quoted on OTCQB Under Ticker Symbol "SBOT" • PR Newswire (US) • 03/07/2024 12:00:00 PM
- Airship AI skyrockets with DOJ contract; Carrier Global sells Fire Industrial division for $1.43 billion, and Latest News • IH Market News • 03/06/2024 11:01:03 AM
- Form FWP - Filing under Securities Act Rules 163/433 of free writing prospectuses • Edgar (US Regulatory) • 03/05/2024 10:21:34 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 03/05/2024 10:19:30 PM
- Magna Announces Senior Notes Offering • GlobeNewswire Inc. • 03/05/2024 10:10:07 PM
- Form SUPPL - Voluntary Supplemental Material by Foreign Issuers [Section 11(a)] • Edgar (US Regulatory) • 03/05/2024 01:39:26 PM
- General Motors, Magna, and Wipro Team Up to Develop Automotive Software Marketplace: ‘SDVerse’ • GlobeNewswire Inc. • 03/05/2024 12:30:00 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 02/29/2024 10:23:05 PM
- Form EFFECT - Notice of Effectiveness • Edgar (US Regulatory) • 02/29/2024 05:15:46 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 02/23/2024 12:41:14 PM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/14/2024 05:48:47 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 02/13/2024 02:23:21 PM
- TSX Accepts Notice of Intention to Make Normal Course Issuer Bid • GlobeNewswire Inc. • 02/13/2024 11:30:00 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 02/12/2024 08:58:52 PM
- CORRECTION – Magna Announces Fourth Quarter 2023 Results and 2024 Outlook • GlobeNewswire Inc. • 02/12/2024 10:00:00 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 02/09/2024 09:23:10 PM
- Magna Announces Fourth Quarter 2023 Results and 2024 Outlook • GlobeNewswire Inc. • 02/09/2024 10:00:00 AM
Avant Technologies Equipping AI-Managed Data Center with High Performance Computing Systems • AVAI • May 10, 2024 8:00 AM
VAYK Discloses Strategic Conversation on Potential Acquisition of $4 Million Home Service Business • VAYK • May 9, 2024 9:00 AM
Bantec's Howco Awarded $4.19 Million Dollar U.S. Department of Defense Contract • BANT • May 8, 2024 10:00 AM
Element79 Gold Corp Successfully Closes Maverick Springs Option Agreement • ELEM • May 8, 2024 9:05 AM
Kona Gold Beverages, Inc. Achieves April Revenues Exceeding $586,000 • KGKG • May 8, 2024 8:30 AM
Epazz plans to spin off Galaxy Batteries Inc. • EPAZ • May 8, 2024 7:05 AM