Global Energy - Energy and Capital

The Renewable Energy Revolution

I have dished out a healthy share of criticism about the paths we are taking into the energy future, so perhaps it's time I offered some paths of my own. I will outline them as simply as possible, since the data and thinking behind them could fill a book.

First we must know where we're going.

Credible models show that by the end of this century, essentially all of the fossil fuels on earth will be consumed—oil, natural gas, and coal. Presumably, whatever fuels do remain at that point will be reserved for their highest and most valuable purposes like making crude oil into plastics and pharmaceuticals, not burning it in 15% efficient internal combustion engines.

Consider the following world model for all fossil fuels:

Source: "Olduvai Revisited 2008," The Oil Drum, by Luís de Sousa and Euan Mearns. Cumulative peak is Data sources: Jean Laherrère for natural gas, Energy Watch Group for coal and The Oil Drum for oil. [This is an exceptional study and I recommend it to my readers!]

By the end of this century then, a mere 90 years from now, we'll need to have an infrastructure that runs exclusively on renewably generated electricity, biofuels, and possibly nuclear energy. That's where we're going.

Fortunately, there is more than enough available renewable energy to meet all of our needs, if we can harness it. Unfortunately, we're starting from a point at which less than 2% of the world's energy comes from renewables like wind, solar and geothermal.

Hydro provides about 6%, and nuclear about 6%, but for reasons too numerous to get into here, some of which my longtime readers have already heard, I don't believe either source will increase much in the future, and both could actually decline.

Our challenge then is to make that 2% fraction grow to replace about 86% of the world's current primary energy, in 90 years or less.

We are currently at peak oil, a short, roughly 5-year plateau which goes into terminal decline around 2012. All fossil fuel energy combined peaks around 2018, less than a decade from now.

All strategies for accommodating the fossil fuel decline require decades to have any significant effect. The now-iconic study "Peaking of World Oil Production: Impacts, Mitigation, & Risk Management" (Hirsch et al., 2005) demonstrated that it would take at least 20 years of intensive, crash-program mitigation efforts to meet the peak oil challenge gracefully. Another study, "Primary Energy Substitution Models: On the Interaction between Energy and Society," (C. Marchetti, 1977) showed that it generally takes decades to substitute one form of primary energy for another, and 100 years for a given source of energy to achieve 50% market penetration.

Therefore, we are going to have to accomplish most of the renewable energy revolution in a scenario of ever-declining fuel supply. In just 50 years, we'll be working with about half our current energy budget. So in fact we may only have about 50 years to build most of the new renewable energy and efficiency capacity we will need to get us through the end of the century.

Another important factor is that exports will fall off much faster than total supply. (See my article on the oil export crisis from last year.) Foucher and Brown (2008) have shown that the world's top five oil exporters could approach zero net oil exports by around 2031. Net energy importers like the US could be increasingly starved for fuel as decline sets in and accelerates, and net energy exporters could wind up shouldering much of the burden of new manufacturing. This factor means that we will have to front-load as much of our development as possible.

The final and most important factor is population. The few population models that actually take fossil fuel depletion into account assume that global population increases roughly out to the global fuel peak, and then stabilizes at that level or declines naturally while economic development promotes lower fertility rates and renewables and energy efficiency increase to fill the gap of declining fossil energy. I understand why this assumption is made—because the alternative is too ghastly to contemplate—and for the immediate purpose of this article I will go along with it. I will note however that history and scientific observation of populations suggest some sharp episodes of decline are more likely, and in my estimation we will end this century with a considerably smaller population than anyone forecasts, at some level well below today's.

How, then, can we replace or offset through efficiency at least 40% of our current energy supply with renewables in the next 50 years, while fuel prices are rising and the global economy is flat or shrinking due to a lack of fuel?

Seven Paths to Our Energy Future

A proper model for achieving this goal would be a very large undertaking, the sort of thing that should be done by a team of experts with a budget. (Is anybody at the Department of Energy listening?) But I can identify some key pathways that are, in my estimation, no-brainers. Because the solutions going forward will be quite different for each country, I will limit my recommendations to the US.

1: Rail. Rail should be Priority 1, and should be granted the largest portion of public funding. We should begin as quickly as possible with light urban rail, and work over the next 40 years to build a comprehensive high-speed long-distance rail system.

Rail is by far the most efficient form of overland transportation we know, and moving people out of their cars and freight off the roads will yield real and immediate savings in liquid fuel consumption. Not only will this help alleviate America's need for rapidly declining oil exports, it is a proven, fairly low-tech, sustainable and workable solution that would allow renewably generated electricity to be phased in over time with minimal disruption.

2: Rooftop Solar PV. Utility scale projects like giant solar farms in the desert and giant wind farms in the Midwest (or offshore) all face serious hurdles in siting, permitting, environmental impact, and transmission capability. Rooftop photovoltaic (PV) solar systems face no such issues and can be deployed right now, building capacity incrementally over time. PV has been proven in the field commercially for over 30 years and, speaking as a former residential and small commercial solar designer, I know that it can provide 50-100% of the needs of most small buildings.

Rooftop PV also has a capital advantage. Whereas utility-scale solar and wind projects need to secure large power purchase agreements in order to raise enormous amounts of capital that will be tied up for decades, small rooftop PV systems are purchased outright by the end-users, assisted by ratepayer-funded incentive systems. Simply getting projects done is considerably easier.

From a funding perspective, rooftop PV is arguably one of the easiest sources we can develop, and options are proliferating. Cities like Berkeley and San Jose are offering municipal bonds to finance local projects, which keeps the financing small, local, and low-risk. Third-party financing companies are springing up all over the country, making it possible for home and business owners to put solar on their roofs with no out-of-pocket expenses and pay them off at the same rates or less than they're already paying to utilities, with nearly zero risk to all parties. End-users enjoy an additional benefit of having a known, fixed cost for their future power, even as fossil fuel prices skyrocket.

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Another very important advantage is that rooftop PV is distributed, which contributes to the resiliency and robustness of the grid. In most modern neighborhoods, no grid upgrading is needed to support rooftop solar systems. More distributed power generation also means fewer points of failure: a cloud over here is compensated by clear sky one mile away. It also enables micro-islanding, which would allow most of the grid to stay up when there is an outage, instead of taking vast chunks of the country's grid down along with it as we have seen in the recent past.

Utilities also win with rooftop PV, because it means they don't have to spend an enormous amount of effort and money in search of enough clean, green kilowatt-hours to meet their renewable portfolio standards, nor spend it on beefing up their grids. It essentially costs utilities zero to take up energy produced this way; in fact it can be a net benefit to them because the homeowner ends up paying for the new smart meters they plan to deploy across their grids anyway (at a cost of tens of millions of dollars).

Feed-in tariffs (FiTs) that pay a premium for kilowatt-hours generated by rooftop PV have been employed with great and immediate success in Germany and Japan, to the point where both programs will be largely phased out within the first decade. Support for a national FiT in the US is still weak, but I believe it could become a reality if the public were educated about the success it has enjoyed elsewhere in the world.

3: Alternative Vehicles. Since reconfiguring our urban topology around transit and deploying light rail will take decades, we will need some transitional solutions that still allow us to get around in cars for a good many years. All-electric and plug-in hybrid electric vehicles are a two-fer: They can take advantage of growing renewable electricity supply, and they can function as a giant, distributed battery for intermittent renewable sources using vehicle-to-grid (V2G) technology. In time, V2G could provide the final link that allows renewable energy to fully displace fossil fuels.

We will need to begin building the electric vehicle charging infrastructure as quickly as possible to accommodate these new vehicles, but it needn't be any more complicated than deploying a new row of parking meters. This I think is a good and proper use of public funding. The automakers themselves should be able to find adequate funding via the private sector, with perhaps a modicum of federal support for research to jump start next-generation development of batteries and propulsion systems.

Compressed natural gas vehicles are another transitional solution that would take advantage of domestic gas supply while cutting demand for imported crude.

Biofuels may also play a role, although I continue to be skeptical about how much they can truly achieve once net energy (EROI) and food-vs.-fuel tradeoffs are taken into account. Corn ethanol fails these tests, but to the extent that cellulosic biofuels pass them, they could take a substantial bite out of our demand for petroleum. Still, it will take a decade or more to scale it up to significant levels.

Before the global economic downturn, our replacement rate was about 14 million new cars and light trucks per year. We have about 250 million such vehicles now. At that rate (we're well down from it now), it would take 18 years to replace the fleet, but we probably won't maintain that rate while the economy shrinks and fuel prices rise. Therefore we should concentrate on a rapid, near term deployment of alternative vehicles, before it gets prohibitively expensive and difficult to do so, even if they wind up having all the sex appeal of a mass produced WWII Jeep.

Ideally, we will only have to replace a fraction of the current fleet, with the rest of the traffic having been moved to rail.

4: Efficiency. Most of the efficiency gains we can make are thermal: reducing the energy it takes to heat and cool buildings. These gains ultimately translate into less coal and natural gas demand, so they will do little to reduce our demand for oil, which must be our first priority. In the long run however, efficiency must make up for any shortfall in renewable energy production, so it must be pursued continually over many decades.

More efficient regular gasoline and diesel vehicles also belong in this category, and may reduce our dependence on oil if they are sufficiently efficient and the gains aren't nullified by the Jevons paradox. In my view, anything under 25 MPG is simply pathetic at this point, and undeserving of any federal support. Incentives for more efficient ICE vehicles should be geared to produce the greatest possible gains in fuel economy, not the watered-down "Cash for Clunkers" bill we got, which will ensure another several years' worth of inefficient SUV production.

5: Utility Scale Renewables. Rooftop PV may be able to fill the short-term supply gap if aggressively pursued, but in the long term we'll need every renewable kilowatt-hour we can get. We'll need large solar plants across the Southwest, and huge wind farms in the Midwest and offshore. Geothermal and marine power can also make major contributions in time, but they're babies now, and will need public guarantees and funding to reach the level where they are commercially viable technologies.

6: A Beefier, Smarter Grid. In order to carry all the new renewable power, we're going to need a bigger, more resilient, and smarter grid. The good news is that we already have most of the technologies we need in this area. All that we lack is the will and the funding to put it in place. In the same way that it took federal funding and initiative to create the interstate highway system, the grid will also probably need to be nationalized and its enhancement funded publicly in order to meet this challenge.

A key element of the new grid will be long-distance high-voltage direct current (HVDC) power lines to transmit the power from the large utility scale projects to the cities where it's needed. This must be on the short- to medium-term agenda since it must be ready to take on real capacity within 20 years and be nearly full-blown within 40 years.

7: Keep Drilling. If we back off too much too soon from oil and gas production, it could leave us without adequate or reasonably priced fuel to accomplish this transformation, and sink the entire effort. I think we'll need as much oil and gas (and to a lesser extent, coal) as we can possibly produce in order to pull it off. Just imagine how difficult it will be to produce a solar panel or a large wind turbine using only renewably generated electricity to mine the raw ores, crush them, transport them, smelt them down and turn them into stock, transport them again and turn them into end-products, then transport them a final time and install them. I think it's safe to say that we have no idea how to do all that without liquid petroleum fuels.

The twilight years of hydrocarbon fuels are essentially upon us, but we'll need them more than ever as they peak out and decline. We will have to keep drilling, and the oil business will have to be able to turn a fair profit.

At the same time, I have long maintained that after a nearly a century of commercial operation, the petroleum businesses should be able to get by on its own, without public subsidies of any kind. If that means the price of fuels goes up, then so be it. We're going to have to start paying a fair value for those finite, rapidly disappearing resources some day, and price increases will only encourage efficiency and alternatives.

Just Do It

Turning these conceptual pathways into action will not be easy, and we may be forced into action before we have perfect clarity about where we're going and what it's all going to cost. Yet I have no doubt that if we move on these seven pathways as quickly as possible, we will make progress in the right direction. There will be time to fine-tune it later.

Over the long term, the economics of energy are clearly in favor of renewables. The costs of producing and burning fossil fuels can only increase, and the costs of renewable energy will fall for decades before stabilizing.

Finding the money to rebuild so much of our infrastructure will no doubt be a challenge. But if we're willing to put a $2.5 trillion debt burden on the future to bail out the financial system, and untold trillions more to provide military protection for the oil resources that remain, perhaps it's just a question of priorities. I have no doubt that the money would be better spent on building an energy infrastructure that will actually sustain us.

The successful pathways are the profitable pathways. Think rail, small solar PV, alt vehicles, efficiency, utility renewables, grid, and drill, baby, drill.

Until next time,

Chris

Energy and Capital

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"Indeflation" and "Compartflation"

A fierce debate now rages among economists, investors, pundits and the puppetmasters of fiscal policy: What's next, inflation or deflation?

Has the most massive money-printing spree in history successfully stimulated the global economy and put it back on an upward course with rising inflation? Or are we still in a global downturn, temporarily masked by the stimulus, with prices, wages and employment still falling?

A comforting 30% gain in the major stock market indexes since the March lows has given renewed confidence to the "green shoots" trumpeters who dominate the airwaves and the press.

But grayer and wiser heads in the investing community—like Dave Rosenberg, John Mauldin, Nouriel Roubini, Gary Shilling, Peter Schiff, and Dave Cohen—have a more bearish view. The financial sector must now deleverage, they argue, which means liquidating assets, repaying debt, saving instead of borrowing, and contracting in general. In their view, the process will take years, not months, and what we have seen since March is a classic bear market rally.

Consider the data Rosenberg offered in a commentary this week in support of his deflationary thesis:

Residential real estate still sports a 12-month supply of unsold inventory, and housing starts have staged a very weak recovery this spring.
Every major industry posted a decline in May. Industrial production had its seventh decline in a row in May, to a level last seen 11 years ago. The Institute of Supply Management (ISM) index, a measure of manufacturing activity and a proxy for tech spending, is still falling.
Employment slid in May to greater depths than were seen in the last two recessions, and "real organic personal income" fell for the second time in the last three months. Ultimately, recessions don't end without rising employment, meaning consumers with money to spend.
Prices are generally still falling. The Producer Price Index (PPI), used to evaluate wholesale price levels, is down 37% year-over-year "to a 50-year deflation low of -5.0."

There are other signs that this spring's green shoots may be browning. The Consumer Price Index (CPI), the Labor Department's key measure of inflation, has fallen 1.3% over the past year, the largest decline in nearly 60 years, mainly due to the 27.3% crash of the energy index component.

Meanwhile, the consumer remains beaten and bruised. As my colleague Steve Christ pointed out this week, U.S. household net worth fell by $1.3 trillion in the first quarter, and household wealth is down 21.6% from its 2007 peak. Commercial real estate is contracting painfully, with prices plunging and vacancies and defaults soaring. Meanwhile, consumer credit defaults are still rising, even as rising interest rates have snuffed out the resurgence in home-buying.

Liquidity in the credit markets remains a problem as well. Banks simply aren't lending out the Fed's forced injection of fantasy capital. Indeed, they are entirely intent on paying it back as quickly as the Fed will let them, on the heels of secondary stock offerings and other measures they have taken to raise capital and reduce their exposure. (For a personal anecdote, I called Discover last week to take advantage of a recent 1.8% promotional offer on balance transfers they had sent me, and was told that they aren't accepting any more balance transfers right now, from anybody, period.)

On the whole, I think the case for deflation and contraction is well made.

Commodity Inflation

At the same time, food and energy prices have been rising rapidly. Oil has rocketed from the low $40s to the low $70s in just four months, a roughly 71% gain. Soybeans rose about 50% over the same period, with most other grains gaining similarly. Normally, this would suggest inflationary fears, and indeed it has apparently drawn hedge fund money off the sidelines, out of bonds, and back into energy and commodities. (Energy analyst Dave Cohen did a great study of speculation in the current commodity cycle this week in "Bad Signs, New Bubbles.")

I don't want to make too much of the commodity resurgence, however. The market continues to price oil inversely to the dollar, and the dollar's fall has been echoed almost perfectly by oil prices:

The dollar's decline can be viewed as the proper result of printing trillions of dollars out of thin air, without new assets to back it—the inflationary thesis.

Indeflation

On the whole this year is looking a great deal like last year across the energy and commodities sector, with the same sort of inflation. But there is an important difference this year: The economy and the consumer are sick, very sick. Gasoline at $3 was a nuisance last year, but this year it really hurts.

Perhaps we should be zooming out on this picture, and considering the affordability of oil. Consider this 60-year chart from the blog of "Mr. Excessive," which tells quite a different story:

The affordability of oil, as measured by the S&P500, peaked in 1999, and has been in decline ever since. Oil prices began rising sharply at that time, as the early effects of peak oil began to be seen. Global conventional oil production has been flat since 2005, despite a tripling of prices.

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So is it inflation or deflation?

My pal Gregor Macdonald argued this question elegantly on his blog in April, and in a conversation earlier this week asserted, I think rightly, that it's not an either-or question. In fact, we're seeing inflation (of prices) and deflation (of assets) simultaneously. Investor guru Doug Fabian has termed this "indeflation" and Izabella Kaminska of FT Alphaville has called it "compartflation."

Instead of just looking at the dollar and inflation, we should consider that, as former International Petroleum Exchange head Chris Cook argued on The Oil Drum, energy is the only real currency. Our fiat money is but a distorted representation of it, and that energy is declining in real terms as oil, natural gas, and coal all become progressively harder to extract and of lower energy content.

Are We At An Inflection Point?

We now appear to be bumping our heads against an invisible ceiling, where the decline in real energy meets our pain tolerance for high prices. When gasoline hit $4 last year, it created real demand destruction because people simply couldn't afford it with their evaporating dollars. Likewise, the spike in natural gas and coal prices ultimately translated into such high prices for basic building materials like cement and steel that demand was curtailed.

It now seems possible that we have reached an inflection point in economic history, where the price at which energy is high enough to sustain new production is the same price at which things become too expensive, leaving us no option but to downsize.

Until we understand this key point, we are going to continue to go through wrenching cycles like we experienced over the last year. Spiking energy and commodity prices lead to destruction of the economy, which then gathers itself at a lower overall level until prices spike again, and back around the wheel we go. As energy declines, the ceiling will get lower and lower, and it will take more and more money to buy the same things.

No amount of tinkering with monetary policy can change that. Unlike money, Btus can't be printed out of thin air.

Unfortunately, neither the Fed nor Congress seems to have learned this lesson.

The Fed still thinks that tweaking interest rates, buying bonds, forcing banks to keep the fantasy money, hiding the stress test results and the like can somehow ease us into a manageable recovery.

A few bright bulbs in Congress suggested this week that we exchange 70 million barrels of light sweet crude oil from the Strategic Petroleum Reserve (SPR) for an equivalent amount of lesser quality heavy sour crude, in an effort to dampen oil prices. Aside from being a fundamentally bad idea, I continue to believe such a move would be utterly ineffectual. The maximum official rate at which the SPR can be drawn down is four million barrels per day, but I suspect the actual rate would be far lower. In any case, the price difference between the two grades of oil is fairly small, and the value of the swap would virtually disappear within a flow of 84 million barrels a day of globally priced oil.

The other bit of new legislation, a "Cash for Clunkers" bill that passed yesterday, also appears to be completely toothless. I supported the idea until I learned the anemic requirements of this bill, which would offer $3,500 vouchers for a mere 2 mpg gain in fuel economy for light trucks and SUVs, and $4,500 for a 5 mpg improvement. Cars would only need to gain 4 to 10 mpg to qualify.

Suffice to say that I still have very low expectations that our national leadership will offer any tangible, effective methods to significantly reduce our consumption of petroleum. I certainly do not see them coming to grips with the near-certainty that by 2012, the world's oil supply will go into terminal and relentless decline.

Looking internationally, finance ministers for the Group of Eight (G8) expressed concern over the influx of capital into the commodity sector after their meeting last weekend. In a communiqué, the group stated, "Excess volatility of commodity prices poses risks to growth. We will consider ways to improve the functioning and transparency of global commodity markets, including considering IOSCO [the International Organisation of Securities Commissions] work on commodity derivative markets." Ministers have asked the International Monetary Fund (IMF) and the International Energy Agency (IEA) to suggest new ways to monitor and regulate the oil markets, in an effort to limit speculation and dampen future volatility.

If done very carefully, such an effort could moderate the boom-bust cycles ahead, and give the world a crucial measure of slack in which we can sustain the long term investment horizon needed to transition to a renewable energy infrastructure. If done hastily or badly, it could starve the energy markets of capital, or cause unintended and probably worse effects.

I think that as it is now constituted, the market is inadequately equipped to face this inflection point of indeflation, and history is no longer a useful guide. We're entering uncharted territory while the risk of peak oil is still priced at approximately zero.

So what does all this mean for investors?

First, it means long-term investing in a diversified portfolio of stocks is probably not going to be a good strategy for a long time to come (if ever); it's time to play defense and look for low-risk yield. Second, it means that investing in oil and commodities will continue to be the name of the game for many years, but investors must watch the signs I have identified here carefully to know when it's time to dive in and time to jump out as we churn through these cycles under a dropping ceiling. And third, it means that we all need to learn to live at a lower level, eliminate debt, build savings, and buckle up for a long and bumpy ride.

There are still profits to be made, however. In fact, my colleague Ian Cooper recently published a detailed report that pinpoints exactly how this period of commodity inflation could hand you dozens of double-digit energy trades. If you're looking for the easiest gains in this market, then I urge you to read it. Just click here.

Until next time,

Chris

Energy and Capital

Uranium Price Outlook

Whenever I mention the name M. King Hubbert, the first thing that comes to my readers' minds is probably peak oil.

That's understandable, right?

Even the few of you (very few, I hope) who are stubbornly optimistic about the world's future oil productoin have at least heard of peak oil. Okay, you're probably wondering how uranium comes into play here.

As many of you are aware, the concept of Peak Oil was first presented in Hubbert's famous speech to the American Petroleum Institute conference in 1956. What you may not realize is that Hubbert actually titled his speech, "Nuclear Energy and the Fossil Fuels."

Don't believe me?

Well, I'll let you read the original paper for yourself. For those of you interested in viewing that piece of history, I've provided a link in a note below. Please feel free to leave a comment and let me know what you thought of it.

As the age of fossil fuels comes to an end, Hubbert argued in his 1956 paper, nuclear energy has the potential to take over oil's throne. And to be honest, part of me can't help but agree.

However, as much as I'd like to get behind renewable energy, the fact remains we're decades away from renewables' being able to produce energy on a such a massive scale.

The scale of energy is simply amazing. Here's a breakdown you might remember from before:

1 kg of firewood equals about 1kWh of electricity.
1 kg of coal or oil comes out to about 3 or 4 kWh of electricity.
And 1 kg of natural uranium equals nearly 50,000 kWh of electricity!

Don't get me wrong, dear reader, we need to develop every source of energy we can get our hands on. Nobody should be arguing otherwise, especially considering global oil production is in for a serious wake-up call. And there really isn't a better time to get a piece of the action than right now.

Uranium Price Outlook

Now, uranium has always been one of the best ways to play nuclear energy. Many of you may even recall when uranium prices had a huge run between 2002 and 2007. Uranium rose as high as $136 per pound in 2007 (from a low of $8 per pound in 2002). That means the price of uranium jumped about 1600% between 2002 and 2007.

However, prices soon came crashing down:

As you can see, things haven't been pretty for uranium lately. The spot price for U₃O₈ recently fell another $2 per pound and now stands at $49 a pound.

So, in which direction is uranium headed?

It's going to boil down to two things. The first is how tight the world's uranium supply gets during the next few years. And, of course, how much growth we see in the development of nuclear energy.

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According to the World Nuclear Association (WNA), the 436 reactors operating across the world will need approximately 65,405 tonnes of uranium in 2009. In 2007 when prices peaked at $136 per pound, the world only mined 41,279 tonnes of uranium. In other words, mining makes up about 64% of the demand.

While demand looks to get tighter over the next few years, growth in the nuclear sector is a point of debate. Last Friday, the IEA warned that the fate of new projects may be in trouble. As the IEA puts it, "The global economic downturn could lead to delays or cancellations of new nuclear power plant projects."

Meanwhile, G8 ministers expressed their support for nuclear power. During a meeting last week in Rome, the group stated that nuclear energy could help diversify the energy picture.

China is certainly taking advantage of nuclear power. The country believes nuclear power could make up 5% of its generating capacity within the next decade. That would require building another 60 reactors over the next eleven years. According to the WNA, China already has 12 new reactors under construction, with another 33 planned and 80 being proposed.

Here in the U.S., nuclear power still makes up nearly 20% of our electricity demand. We have over 100 reactors currently operating across the country. Like I said before, if we're on the verge of sliding down the other side of Hubbert's peak, we're going to have to develop all our energy sources.

So, are uranium prices headed back into record territory?

I wouldn't expect another price shock for uranium. However, I do believe spot prices could easily reach between $60-70 per pound as early as next year. And obviously, any economic recovery could potentially tip the scales.

But here's a little secret. . .

It doesn't matter if uranium prices fail to reach $136 per pound over the next few years. You see, many investors are already cashing in their profits. These nuclear stocks are precisely the kinds of energy plays that members of The $20 Trillion Report are taking advantage of right now. You can learn more about it here if you're interested in making these gains for yourself.

3 Top Uranium Plays

The first uranium play that is Cameco (NYSE: CCJ). The company reported a 38% decrease in their quarterly profit due to higher production costs. Yet since March, the company has still managed to gain an impressive 114% for investors.

Naturally, investors looking for more than a straight mining play have several options. Playing a nuclear ETF gives you the opportunity to play more to your comfort level. Two options open to investors are the Market Vectors Nuclear Energy ETF (NYSE: NLR) and the Powershares Global Nuclear Energy ETF (NYSE: PKN). These nuclear ETFs will offer you a chance to invest in a basket of stocks, rather than focus on an individual company. If energy continues to trend higher on news of a global economic recovery, we'll continue to see a growing interest in nuclear energy.

Until next time,

Keith Kohl

Energy and Capital

Editor's Note: I've managed to track down the original 1956 Hubbert report. If any of you are interested in looking at history firsthand, this is for you. And even if you're not, it's still a fascinating read. The paper gives you insights on a nuclear future from M. King Hubbert himself. So without further ado, you can read it for yourself in a PDF format by simply clicking here.

The Great Divide on Energy Policy

When I accepted the invitation of the American Petroleum Institute (API) to attend the 2009 Offshore Technology Conference (OTC) in Houston on their dime, I couldn't resist the offer out of sheer curiosity. But I had little notion of how illuminating it would be, on so many levels.

This isn't your ordinary, bland-slide-decks-with-boring-exhibits conference. It's the cutting edge of the oil and gas business, or perhaps more accurately, the cutting edge of all industry: offshore, particularly deepwater (over 1000 feet of water) drilling. Giant machines, sprawling constructions of pipe and pumps and electronics and incredibly high-tolerance parts litter the sprawling exhibit hall. The speakers are top executives in the oil and gas industry, and policy leaders on energy and climate change. Some 60,000 people from all over the globe will attend this year's conference. In short: It's immense.

I could describe the utterly amazing technology on display here. I could share what I learned about the oil and gas industry's deep commitment to safety and minimizing its environmental impact. I could inundate you with data and names and affiliations.

But that's not what the discussion at this conference is about—not from my perspective.

The top issues of the energy industry revolve around policy more than technology. Should we drill ANWR and the Outer Continental Shelf (OCS)? Can we achieve energy independence? How can we grapple with climate change without destroying the economy, and the sources of energy on which we utterly depend? Can renewables supplant fossil fuels?

As critical as these policy debates are, I see little in the way of progress.

An Ironic Debate

I saw a parade of oil industry representatives plead for a transparent and fact-based public dialogue about our energy options for the future. We should step away from the all-or-nothing debate on fossil fuels vs. renewables, they said, stop demonizing any of our potential energy sources, and get serious about addressing our energy problem before it's too late. As the head of the API said, "The energy issue will intensify until cooler heads prevail," and the debate desperately needs to be depoliticized.

But in the next breath, apparently unaware of the obvious contradiction in it, I saw those same executives complain bitterly about the policymakers who stand in the way of their progress. I heard them discount the potential of wind and solar to meet our energy needs, while trumpeting the much smaller footprint of modern oil and gas production. I heard overblown claims about how technology will continually increase reserves, and how offshore drilling in America could solve our problems if only they were allowed to do it.

One executive decried the "cheap shots" taken at the oil and gas industry by climate change activists, and then a few moments later mentioned how much he liked a print ad that offered a false choice between offshore drilling and high gasoline prices.

I asked a panel of oil company executives how a potential 2 - 3 million barrels per day (mbpd) of new oil production from the OCS by 2030 (according API and EIA data) would figure against the background of steadily declining North American supply. The only response I received was that 2 mbpd is a lot, we'd be happy to have it, and if we don't start drilling for it now, we'll regret it.

I heard not one word suggesting that oil production may have in fact peaked, no mention of decline rates, nor any hint that there might be any limits on supply other than the political will to develop new sources.

The oil and gas industry does acknowledge that the burning of their products probably contributes to climate change. They are resigned to the fact that carbon will soon come with a price, and they are intent on helping to define how that will be done under the rubic that "If you're not at the table, you're going to be on the menu." At the same time, they seem to have a greater appetite for a political approach to the climate change debate than an objective evaluation of the data.

The green side of the debate is, unfortunately, no better. An attendee stood before a panel of major oil company executives and ask how the energy industry could engage more fruitfully with policymakers and the public on climate change, then admitted that she had boycotted a recent local presentation by T. Boone Pickens about his energy plan for the country simply because he was an oil baron. She considered it an act of conscientious objection.

The contradiction of her position apparently escaped her as well, along with the fact that of all the oil barons in America's history, Boone is arguably the most forward-thinking and realistic, and a major proponent of moving beyond oil. Her story offered a classic demonstration of how too-principled positions on energy so quickly lead to stalemates.

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As a longtime advocate for renewable energy and a former solar system designer, I have been to my share of "green" conferences. I have often heard the utterly unrealistic claims of renewable energy advocates, and listened to them vilify the oil industry. They seem to have as little appetite for the facts on fossil fuels as the fossil fuel industry has for objective evaluation of renewables.

So while I agree with the conference speakers who called for a balanced, non-demonizing policy debate, what I see is both sides—the green/climate change side and the fossil fuel side—retreating to their corners, throwing up walls of propaganda, and demonizing the other side.

The middle ground, where truth and progress reside, feels virtually empty.

I am left to ponder, once again, why that is. And once again I come to the conclusion that you can't make policy without politics. What we have here is simply political maneuvering with each side trying to gain an edge by overstating their positions, in hopes that when the dust settles, they'll be left holding something. It is most emphatically not a neutral and balanced dialogue.

In fact, there is no dialogue at all. Cleantech people go to cleantech conferences, and oil and gas industry people go to oil and gas conferences, and rarely do the two crowds mix. In the halls of Congress there is much shouting, but little listening. At the end of the day, it is the art of political compromise, not data, which drives policymaking.

The oil and gas industry remains mired in denial about the peak and decline of its products. Renewable advocates are still lost in a dream about quickly replacing fossil fuels with green energy and an infrastructure that runs on it. Climate change concernists continue to pin their hopes on visions that cannot possibly be realized in the time frames they need. No side trusts the other.

Ten Inconvenient Truths

Allow me then to stake out a bit of middle ground, based on what I believe to be the objective facts, in an effort to bring the parties together and perhaps make some actual progress on the policy front.

We have extracted nearly all of the world's easy, cheap oil and gas, and now we're getting down to the difficult, expensive stuff. The largest untapped resources that remain are in extreme places like deepwater and the Arctic, and marginal formations like shale. As a result, global oil production has for all intents and purposes peaked. Natural gas production will also peak in 10 to 15 years. Neither technology nor high prices will change that. Therefore we must begin to replace those fuels with renewables, and use what remains much more efficiently, with the expectation that most of the world's oil and gas will be gone by the end of this century.
Drilling for oil and gas drilling in the OCS and ANWR must and will be done; our need for those fuels is simply too great to pass them up. An additional 2-3 mbpd will put a dent in the roughly 12 mbpd we now import, but if we drill for it now, it won't come to market for 10 years or more. By that time, it probably won't even compensate for the depletion of conventional oil in North America, nor will it do much to reduce prices. But it will be crucially necessary, and producing it won't make an ugly mess of the environment.
Renewables are clearly the long-term answer, as is an all-electric infrastructure that runs on its clean power. However, it will likely take over 30 years for renewables to ramp up from a less than 2% share of primary energy today to 20% or more. They probably won't even be able to fill the gap created by the decline of fossil fuels. Oil and gas currently provide about 58% of the world's primary energy, and they will remain our primary fuels for a long time to come.
It will take many decades to reconfigure out transportation systems to run on electricity. It will take decades to fix our wasteful, leaky built environment so that it doesn't need as much energy to begin with. None of the solutions will come quickly or easily.
Neither renewables nor fossil fuels nor nuclear power alone can bring "energy independence." Indeed, if independence means isolating ourselves from the rest of the world's energy commerce, it might not even be desirable.
We must pursue all sources of energy immediately and aggressively if we hope to meet our future needs, and pitting one against another is counterproductive.
Nuclear power will not grow significantly in the next several decades, as nearly all of the existing reactors will need to be decommissioned within the next 20 years, and a new generation of reactors must be built to replace them. After we do that, a renaissance for next-generation nuclear energy may be a possibility but it will only happen after we have confronted the crises of peak oil and peak gas. It may produce no net reduction in emissions at all.
It is quite possible that even our best efforts on all fronts will not achieve the carbon emission targets we have set. Climate change must be confronted via a unified policy on emissions and energy supply, which is to say that in our zeal to control emissions, we take care not to squelch the production of the oil and gas that constitutes the majority of our energy supply, at least until we have something to replace it. To do so could have unintended and paradoxical consequences, like impeding the manufacture of renewable energy devices, and contributing to tight supply situations that once again cause fossil fuel prices to skyrocket and further damage the economy. Rather than emphasizing the uncertainty on climate change data, and fomenting fear about the cost of mitigation, all sides must come together in a depoliticized dialogue strictly based on neutral scientific analysis.
We should use accurate and unbiased models of the future growth and decline curves of all forms of energy for policymaking—models based on historical data, not faith. If the data says we're likely to recover another 1.2 trillion barrels of oil worldwide and no more, then we should not assume that future drilling and technological progress will somehow turn that into 3 trillion barrels of recoverable oil.
Carbon emissions will soon come with a price. Drilling the remaining prospects for oil and gas will be expensive: From the decision to invest until first oil is produced, it can take 10 years and $100 million dollars to drill the first well in a new deepwater resource, using rigs that cost $1 million a day to run, and the production platform can cost as much as $5 billion. Deploying thousands of wind turbines and square miles of solar will be expensive, slow, and difficult. Replacing millions of inefficient internal combustion engine vehicles with electric and plug-in hybrids will be expensive. Rebuilding the nation's rail system will be hugely expensive. In short, the good ol' days of cheap electricity and gasoline are likely gone forever, and all the solutions going forward will be expensive.

I share the industry's concern about energy illiteracy, but it cuts both ways. It's true that as long as oil and gas provide the majority of our energy supply, we must continue to invest and drill for it, and the industry must work hard to educate the public and policymakers about that. But to claim that limits on drilling are the only problem, or that renewables cannot provide the energy we need in time, exploits that illiteracy and deliberately confuses the debate.

The fact is that there are good people and good intentions on all sides of the issues, and none of them wants to destroy the environment or the economy.

As I see it, neither the fossil fuel industry nor renewable boosters are yet willing to come out of their corners and work with each other in an honest fashion to develop a truly viable path forward on energy. Until both sides put aside their exaggerated claims and partisan bickering, the public will remain confused about the true options and continue to use politics, not neutral data, as their guide. That cannot produce good policy, and it does all of us a grave disservice.

Such unhelpful contentiousness, denial, and cheating on the numbers is a luxury we can no longer afford. Our energy and climate change problems are real, they're urgent, and they're getting more so every day. It's time to set the tactics of the last war aside, wring politics out of the dialogue, and start grappling in an honest and direct way with real solutions. Nothing else will do.

Next week, I'll dive back into energy data, and share some observations about the impressive technology and the potential of offshore drilling.

Until next time,

Chris

Energy and Capital

Investor's Note: Another inconvenient truth is that Big Oil is already setting their sights on the future. And the interesting part for investors is that you don't need to wait around for decades to act. My colleague, Nick Hodge has been raking in winner after winner so far in 2009. But don't take my word for it, I want you to see those gains for yourself.Simply click here to learn everrything you need to know about the Alternative Energy Speculator.

How to Protect Your Portfolio from the Fed

For energy investors, the market is starting to look like 2008 all over again.

The Fed is printing money like it's going out of style (and it is). The dollar is falling. Oil and other commodities, particularly metals, are rising steadily.

On March 18 the Fed announced a potential $1.15 trillion expansion of its balance sheet to buy up Treasuries and toxic assets. And on Sunday night, Treasury Secretary Tim Geithner threw a Hail Mary pass, begging the private capital community to step up and buy $1 trillion of bad mortgages using mostly FDIC financing.

The debasement of the dollar has reached truly frightening proportions. The government's commitment to solving the financial crisis is now pushing $12 trillion by my calculation—nearly as much as the US GDP.

Put another way, that's enough to pay off every mortgage in the country. Had the money been spent that way, it would surely have cured the fundamental ills of our economic backbone, and put us on a solid path to recovery.

Unfortunately, it wasn't. Nearly all of it is designed to cure the banks' problems and restore confidence in the credit markets, not to help consumers with mortgages and credit card debt and a shrinking job market. Worse, the Fed and FDIC have refused to even disclose who the recipients of the bailout money are. What we do know is that they are overwhelmingly the large banks (and their counterparties in credit default swaps, like AIG), that is, the very characters whose egregious excesses got us into this mess, whose CEOs know Hank Paulson personally. Regional and local banks who had the good sense and restraint to not participate in the subprime Ponzi scheme to begin with are still waiting for a response to their TARP funds applications.

Normally, such a frenzy of money printing would cause the dollar to fall, but these haven't been normal times. The global recession has hurt the rest of the world's currencies even more, and the dollar has appreciated steadily in its status as the "tallest midget."

But with this latest drop from Helicopter Ben, and the desperate Treasury proposal, our currency may have finally jumped the shark. It certainly feels that way to me. On Monday the dollar posted its largest one-day drop since 1971, falling to 83.35 on the Dollar Index, where it is measured against a basket of world currencies.

The End of ‘Rome' on the Potomac

Bloomberg quoted Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc., as saying "This is a historic moment — the start of debasement of the world's reserve currency. It feels to many participants that in the grand sweep of history we are witnessing the end of ‘Rome' on the Potomac."

The depreciation of the dollar is desirable, from the Fed's perspective, because inflation reduces the burden of our debt, and makes US exports more competitive on the world market. Reinflation is now the name of the game, as a deliberate tactic to arrest the contraction of the US economy. Indeed, Fed chairman Ben Bernanke has indicated that he would like to see the US inflation rate in the 3-4% per year range.

Conversely, dollar depreciation is a major concern for holders of US debt, particularly China, which holds the most: about $1.3 trillion of it, mostly in short-term Treasury bills. Rapid inflation of the dollar would quickly destroy the value of their holdings.

Consequently, China has indicated that it is losing its appetite for T-bills, which is one factor motivating the Fed to begin buying back US debt (to support its market). At the same time, China is rapidly investing its dollars in hard assets, particularly miners and oil producers, and making further moves to reduce its exposure to the dollar.

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This week, Chinese central bank Governor Zhou Xiaochuan even urged the International Monetary Fund to create a new "super-sovereign reserve currency" based on a large basket of currencies, which would replace the dollar as the world's reserve currency. China is also working to conduct more of its foreign trade in its native yuan, or in other non-dollar denominated currencies.

Whether the notion of a new global reserve currency has legs or not, we should recognize these shots across our bow as clear indications that dollar inflation is the new big fear, and that it could zip past Bernanke's targets, possibly even sending the US into a deadly hyperinflationary spiral.

We should not concern ourselves just yet with the dollar's demise, reports of which are premature to be sure. What we should be aware of is the anti-dollar sentiment.

And that means that the anti-inflationary trade that put the wind in the sails of commodities last year is coming back. With extraordinarily large sums of capital sidelined by the deepening recession, funds holding cash are anxious to put it someplace—any place—where it will at least retain its value while inflation trashes the dollar.

Inflationary Safe Havens

So it should come as no surprise that the dollar's fall this month was attended by a surge in commodity prices, despite a lack of clear indication that global demand is on the uptick. Oil has climbed steadily from the low $40s to over $53. Silver, gold, copper and lead prices have gained 20-30% in the last two months. Wheat, corn, soybeans, and barley have all gained steadily since their last bottom at the beginning of March. Fertilizer stocks and agricultural ETFs have been back in play as well, posting 15-25% gains for the month.

Does that mean that the bottom is in? Should investors start piling back into the sector, lest they miss out on the easiest gains and best valuations they might ever see in their lifetimes?

My gut says no.

Monday's 7%, nearly 500-point rally in the Dow was indeed impressive and historic, and capped off the largest 10-day rally since 1938. But we should not forget that such sharp moves are precisely what bear market rallies are made of. Since 1928, the Dow has had 28 days with 7+% gains, including Monday's, and 24 of those days occurred between 1929 and 1933. The market didn't put in the true bottom until 1932.

Still, while the threat of reflation gone wild is hanging out there, and continuing to increase under "QE3" (the third round of "quantitative easing," which is simply genuine Wall Street gibberish for printing money out of thin air), it's prudent to put some money to work in commodities now. The steady gains in crude and minerals signal that the smart money is coming off the sidelines and getting some exposure to the sector again.

So how do you play it?

For those with a taste for adventure, there are the ETFs/ETNs that short the financial sector, like the double-leveraged ProShares UltraShort Financials (NYSE: SKF) and the triple-leveraged Direxion Financial Bear 3X (NYSE: FAZ). For those who remember Captain Contrarian, he has been on the sidelines for more than a year and is more bullish on gold than ever, and just went into SKF in size. These are riskier plays with sharp daily movements, however, and are not appropriate for most investors.

For broad, basic exposure to the commodities sector, I like the PowerShares DB Commodity Index Tracking Fund (AMEX: DBC). And in ag, I still like the PowerShares DB Agriculture Fund (NYSE: DBA), and the fertilizer plays The Mosaic Company (NYSE: MOS) and Potash Corp. (NYSE:POT). For many other suggestions, see the Related Articles below.

Another simple way to play oil directly is the ETF United States Oil Fund (NYSE: USO), among others. They all track the futures curve in different ways and are imperfect instruments that don't echo the daily performance of oil prices very well, but over the medium term they work well enough.

Until next time,

Chris

Energy and Capital

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Clean Coal Energy

Today's article comes from guest editor Tsvi Bisk. From his perch at the Center for Strategic Futurist Thinking, Tsvi has a great long-term outlook on the future of global energy. His piece today draws an uncommon link between the world's large coal reserves and the green energy movement.

Enjoy,

—Keith

The United States has the largest recoverable reserves of coal in the world - equal to the entire world's proven oil reserves.

An energy/environment program that includes coal would generate local jobs and augment local tax bases, garnering support amongst large segments of the working and middle class presently alienated from environmental concerns because of their own economic interests.

The cavalier attitude of ivory tower environmentalists towards the millions of working and middle class people who make their livings (directly and indirectly) from coal creates enemies of the environmental movement amongst the very people who should be the most avid allies of environmentalism. After all who suffers more from the health and property damage consequences of irresponsible mining and use of coal?

If we do not help coal become a friend of the environment we are in trouble. It is the fastest growing fuel source in the world and the most democratic - found on every continent and in almost every country. About 40% of the world's electricity comes from coal and approximately 50% of the electricity in the United States comes from coal. Millions of people depend on it for their living. Glib declamations about banning coal are not doable and are dysfunctional to a rational energy and environmental strategy.

But in order to help coal become a friend of the environment, we must create a linkage between the use of coal and the promotion of alternative energy. How might this be done?

"Linking" Coal to Clean Energy through Coal Liquification

First of all, the present system of burning coal for electricity should and can be replaced by a new system of liquefying coal for transportation. If all the coal used for electrical production today in the United States was liquefied (using current liquefaction techniques) this would result in about 3 million barrels of synthetic oil production a day - an amount of liquid fuel equal to that envisaged by the Pickens Plan.

Together, both plans could be producing 6 million barrels of liquid fuel a day for the next 50-100 years. This is equal to the daily amount of petroleum now being pumped from the lower 48 States. Since a metric ton of hard coal is approximately equivalent to 5 barrels oil and a metric ton of lignite coal is approximately equivalent to 2.5 barrels oil there is room for technological innovation to increase the level of extraction from the present 1.25 barrels of oil per metric ton. Prudent policy making, however, dictates that we draw on the most conservative quantitative assumptions.

How would the linkage work?

Hybrids, plug-in hybrids and electric cars should be advantaged for licensing and other taxes. All non-emergency vehicles purchased by governments (Federal, State and Local in the United States) should be hybrids, plug-in-hybrids or electric by 2010. Purchasers, whether private or governmental, would earn greenhouse emission credits they could sell to the coal liquefaction program thus providing an additional economic incentive advantaging these technologies.

The Most Profitable Energy Transition The World Has Ever Seen!

On November 12, 2008, the International Energy Agency (IEA) officially confirmed that every fossil fuel resource we rely on today will simply not be able to keep pace with demand.

As a result, the IEA stated in very clear terms that renewable energy will soon become the second largest source of energy.

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Incandescent bulbs should and can be banned by 2010. Replacing a single incandescent bulb with a Compact Fluorescent Light (CFL) will keep a half-ton of CO₂ out of the atmosphere over the life of the bulb. It is estimated that if everyone in the U.S. used energy-efficient lighting, 80 average-size coal powered plants (500 megawatts each) could close. World over, up to 270 500-megawatt plants could close. There are about 600 such plants in the United States. Just this one step would release over 13% of the coal presently used for electric production. Since about 900 million tons of coal is used annually in the United States to produce electricity, this savings would be in the range of 117 million tons which could be converted into a little over 400,000 barrels of daily synthetic oil production. Most coal fired plants in the United States are 30-40 years old and will be retired over the next decade to be replaced by one of two options:

New ultra-critical coal-fired plants which have 48% energy efficiency (and are much more environmentally friendly) as opposed to the 36% energy efficiency of today's sub-critical coal-fired plants. This 12% savings would release an amount of coal for liquefaction which would yield another 320,000 barrels of synthetic oil a day.
Alternative wind, solar, geothermal and waste-to-energy plants.

Greenhouse emission credits thus earned could be sold to the coal liquefaction program. Alternative energy companies could sell their products/services to homes and businesses as "loss leaders" or "at cost" in order to accumulate greenhouse emission credits which they could then sell for their profit. Such a gambit would make the price of alternative energy technologies more attractive. Consequent increased volume of sales would generate economies of scale and further lower the cost of alternative technologies. In other words coal liquefaction could become a major driver in the dissemination of alternative energy technologies and in this way become a major benefactor of the environment.

The Road to Liquified Coal

The technologies for coal liquefaction have been available since before WWII and can produce a barrel of oil for about $30. Opposition derives from the fact that these technologies release more CO₂ in the conversion process than the extraction and refinement of liquid fuel from petroleum.

To assuage environmentalist opposition, liquefaction installations would be permitted to become operational on condition that they produce a half a ton of CO₂ for every ton of greenhouse gases eliminated by other methods of producing energy. Trading a half a ton of CO₂ for a ton of CO_2, the environment would get a 2X1 benefit. Trading a half a ton of CO₂ for a ton of methane the environment would get a 20X1 benefit. The ability to sell greenhouse emission credits would make waste-to-energy technologies much more competitive, especially sewage and garbage to bio-fuels (the largest generators of free methane are garbage and sewage). In this way Coal liquefaction as a major driver in the dissemination of alternative energy technologies becomes even more significant.

Coal liquefaction installations could be manufactured serially, much as Liberty Ships were manufactured in WWII or F16 fighter planes are manufactured today, using the underutilized manufacturing and human resources of America's industrial heartland in the upper Midwest. Operating licenses would be contingent on the coal companies purchasing greenhouse emission credits to offset liquefaction emissions and would be cancelled when this condition is not observed.

Within five years the United States could be producing a million barrels of liquefied coal daily; within ten years this could increase to 2-3 million barrels a day. The upper amount would be limited only by the availability of greenhouse emission credits and new, cleaner, liquefaction technologies such as microwave technology.

Can there be clean coal? Of course there can. But to be implemented in practice rather than only in public relations puff pieces it must be economically viable. The linkage called for here makes clean coal more than possible - it makes it economically desirable.

—Tsvi

P.S. You can be profiting from all the opportunities the global energy transition has to offer. In fact, readers of the Alternative Energy Speculator have closed 8 winning positions just this month. Click here to start profiting today.

Tsvi Bisk is an American-Israeli futurist, social researcher and strategy planning consultant. He is Director of the Center for Strategic Futurist Thinking (www.futurist-thinking.co.il). His most recent book is The Optimistic Jew: a Positive Vision for the Jewish People in the 21^st Century (Maxanna Press, 2007). His previous book was Futurizing the Jews: Alternative Futures for Meaningful Jewish Existence in the 21^st Century (Praeger Press, 2003). Both are available on Amazon and Barnes & Noble. He has also published over 100 articles and essays and is a popular lecturer in both Hebrew and English.

The Vision Thing

Twenty-one years ago, President George H. W. Bush admitted that he lacked "the vision thing," but when it comes to energy and transportation policy, nearly all of our leaders since him have been equally impaired.

Despite having lived through the oil shock of the early 1970s, only to see our oil imports since then rise steadily to two-thirds of our consumption today...

Despite increasingly urgent warnings from agencies such as the IEA, who warned one month ago that if oil demand recovers in 2010, global spare oil production capacity would fall to zero by 2013, sending oil prices skyrocketing...

Despite ample evidence and clear mathematics that the world could be down to 75% of today's energy budget in 20 years, down to less than 50% in 40 years, and down to less than 10% in 80 years...

The US still has no plan whatsoever to deal with the impending energy crisis, a crisis that threatens to drastically shrink our economy and change our way of life forever. Nobody is driving this bus; we're all passengers.

After nearly 40 years of evidence that finite energy supplies inexorably reach a point of diminishing returns, I can only ask: Why do we still not have a plan? Any plan?

The Pickens Plan

One plan that we do have on the table is the Pickens Plan, T. Boone Pickens' proposal for making a dent in foreign oil consumption. It imagines a corridor of large wind turbines stretching through the windy heartland from Texas to North Dakota, which would replace the 22% of our current electricity supply that is generated from natural gas. Then we would use the natural gas to run commercial and fleet vehicles, offsetting 38% of our demand for foreign oil.

Pickens critics were quick to sling mud on the plan, alleging that he is only trying to line his own pockets with taxpayer money, despite the obvious fact that at the age of 80, he's unlikely to see the fruition of his plan, let alone realize the fortune that it might bring to its investors. Pickens himself has said as much, indicating that his real motivation is to leave a legacy that will put the country on a more sustainable path. (Pickens is a strong proponent of peak oil and probably understands the oil business as well as anyone else alive.)

I have voiced a number of important questions about the Pickens Plan, including how and when the natural gas fired power plants will be decommissioned, the cost and the time-to-market for natural gas powered vehicles, how the project will be financed, and whether our domestic natural gas resources are up to the job. (See "Will Arctic Oil, Natural Gas, MIT, Paris and Pickens Save the Day?" for more on that.)

Although those questions remain unanswered, we at Energy and Capital and Green Chip Stocks have written a fair bit on the Pickens Plan, not because it's perfect, but because it's a plan. Something is better than nothing. At the very least, to the extent that the wind and natural gas parts of it work out, it would make a dent in our oil imports.

The Better Place Plan

I can only think of one other serious plan that excites me, which seems truly pragmatic and sensible: Better Place, a company with a plan to replace oil-burning cars with all-electric cars.

Better Place starts with a simple objective: How do you run an entire country without oil? (Which immediately makes me wonder: Why are none of our elected leaders asking themselves that question?)

At a Brookings Institute presentation last summer, CEO Shai Agassi ticked off the key elements that will allow his plan to succeed.

The first element is policy. Last year, Israel set a goal to get off oil entirely within a decade. By a simple mechanism that would gradually raise taxes on gasoline-based cars over the decade, consumers would be driven toward zero-oil cars. With Israel's leadership, later joined by Denmark, Australia, California, and Hawaii, there is a bona fide market for the vehicles.

The second element was a commitment by automakers Renault and Nissan to build all-electric cars in partnership with Better Place that would go 100 miles on a single charge. For the majority of users, such a range is more than adequate for a daily commute and errands, and the cars would be recharged from the grid at public parking spaces and at home. For longer distance travel, Better Place envisions that one would be able to drive up to a device like a car wash, and have the battery pack replaced in about the same amount of time that it takes to fill up with gasoline today.

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(There may be an even better option. New research from MIT published in the March 12 issue of the journal Nature found that by coating lithium iron phosphate particles with a thin film of lithium pyrophosphate, they could allow a lithium ion battery to be charged and discharged hundreds of times faster than normal, potentially eliminating the need for battery-swapping stations.)

A third element to the Better Place plan is to deploy a charging infrastructure. A half a million charging parking spots will be established initially, which can recharge the car automatically, billing via a built-in ID chip. The company has already obtained $200 in private seed capital to built the charging stations in Denmark and Israel.

The fourth element is the business model itself. Agassi compares it to that of the cell phone business: Instead of charging consumers for the car, it will essentially lend the cars to consumer for free when they sign up for a four-year plan. Consumers will pay only for miles driven and for access to charging stations, which will cost them no more than they already pay for gasoline Agassi claims, and will be sheltered from the risk of owning an expensive, cutting-edge battery pack.

A final benefit of the Better Place strategy is that enlarging the overall fleet of electric vehicles has a multiplier effect. By enabling vehicle-to-grid (V2G) technologies that can use plugged-in electric vehicles as temporary storage, V2G holds great promise as a way to help solve the storage problem of intermittent renewable energy sources like wind and solar, which further enables their growth. At the same time, it creates demand for renewable electric power.

Cars created under the Better Place program are slated for mass production by 2011. By comparison, Chevy will bring just 10,000 units of its new electric Volt to market in 2010, which will do only 40 miles on a charge, at a cost of $40,000. Remember, the Better Place cars will be essentially free to own.

Agassi estimates that under the Better Place plan, at a cost of $500 per car, or about $100 billion, the US could get its 200 million cars off oil entirely. At $45 a barrel and 20 million barrels per day of consumption, that's equivalent to what the US now spends on oil in only four months!

The German Plan

It's not a serious plan to get off oil, but I should mention a curious program Germany has begun which will give a $3,250 rebate to anyone who will scrap an automobile at least nine years old, provide proof that it has been destroyed, and buy a new or slightly used car. It's mainly a stimulus package for the automobile industry, but if it replaces a potential 1.2 million old cars (out of a fleet of over 40 million) with more efficient ones, it would certainly reduce their import needs.

Again: at least it's a plan.

Congress' Plan

Against the brilliant Better Place plan and the pragmatic Pickens Plan, Congress' plan, as embodied in the $800 billion stimulus package signed into law last month, looks downright shabby.

The $100 billion that Agassi would need to achieve his vision is about one-eighth the price of the stimulus package. Although the latter includes $150 billion in public works projects for transportation, energy and technology, it would only put one million electric vehicles on the road—that's 0.5% of our current fleet—in six years, and there is little else in it that would actually reduce our use of transportation fuel any time soon. It's a start, but it's really far too little, too late. In six years, we'll be about three years past the global oil peak and clawing for solutions.

For another comparison, $100 billion is a mere 4% of the $2.5 trillion that we're spending to shore up the fundamentally insolvent banking system. That includes $175 billion to extend the life of the terminally ill AIG, some of which is going to bail out its default-swap counterparties, including Goldman Sachs.

Even the portion of the stimulus package dedicated to rail—the most obvious, tried-and-true transportation technology we possess—is a mere $12 billion or so. The repair backlog for Amtrak's northeast corridor alone is $10 billion. Just $1.1 billion will be spent on improving Amtrak and intercity passenger rail, and another $1 billion is designated for new commuter and light rail.

At this point, the hopes I once had for a rail renaissance in the 2009 funding spree have all but faded.

(For his part, President George W. Bush proposed eliminating the budget for Amtrak entirely in 2006. Apparently he inherited his father's lack of "the vision thing.")

Meanwhile about $30 billion of the stimulus package is targeted for road-building, a painfully stupid investment on a dead end street. In the wake of the most destructive spike and crash of commodity prices in recent history, Congress still doesn't understand that oil prices will spike again, and that our days of importing 13 million barrels per day of oil are numbered.

Now, I'm not saying that the Better Place vision can be achieved exactly as advertised, because it's a bit too early to say. But at least it's a plan—a plan that absolutely can be implemented with today's technology, that's scalable, and that comes at a very attractive price.

America desperately needs serious energy leaders who will not flinch at telling the truth about the future of energy, and who are willing to figure out how in the world we're going to navigate it. Clearly, presidents and Congressmen are not those people. We can only hope that the visions of business leaders like Pickens and Agassi will succeed despite them.

Until next time,

Chris

P.S. Vehicles that run on natural gas and electricity, and their components, are nothing new to investors who subscribe to the Alternative Energy Speculator. We've been following these companies for years, and know exactly which ones are ripe for the picking. Sign up today and start profiting from the transportation revolution!

When 'Change' Comes to Energy Policy

I had lunch last week with my old friend Brian Fan, who is now the senior director of research for the Cleantech Group. Since I became aware of peak oil in roughly 2002, we've had a long and vigorous dialogue about energy, its problems and its solutions. Brian has had the good fortune to be everywhere in the media lately, and is one of the leading champions of the burgeoning cleantech revolution.

He said something at lunch that has stuck with me ever since, to the effect of "Peakers are like the dog that finally caught the fire truck, after all these years. Now what? Everybody understands that we've got a serious energy problem. Cleantech isn't just about the CO2 emissions anymore. What you need to do now is decide if you're going to keep worrying about the problem, or start working on the solutions."

It's a fair point. Those who have tried to bring the message of looming supply limits on energy to the public, and had it fall on deaf ears for too many years, can get a little stuck in their ways.

I first started writing about the necessity of shifting from oil to renewables in my online magazine Better World ‘Zine in 1995. Since then, our national energy strategy has mostly been going the wrong way. To me, peak oil was merely the dénouement of a long and progressively uglier tale, and the last eight years of oil industry influence in the White House have been, shall we say, climactic.

It may sound silly, but after my long study of peak oil and problems of energy depletion in general...after the hundreds of technical papers I've read...after all the conferences and lectures and presentations...after focusing for so long on how to simply get the message out above the din of the "Drill, Baby, Drill" crowd...after eight long years of my often virulent criticism of the Bush administration...it's hard to let it all go.

But it's a new day in America. As someone commented on Twitter on Monday during the inaugural concert, "1/19 is the opposite of 9/11." It's time to change from a national stance based on fear and rooted in the past, to one based in hope that is focused on the future. The pendulum has swung.

Last week, I was critical of what little we know at this point about Obama's infrastructure plan, and how it will affect the future of transportation. I worried that it would focus too much on the short-term problem of maintaining cars and roads, to the exclusion of building a long-lasting and truly sustainable rail infrastructure.

In the spirit of hope and change on a most auspicious Inauguration Day, then, I shall focus this week on the right solutions that we can, and will, pursue.

Stake Your Claim in the Stimulus Goldmine

With $787 billion in pork now sloshing around Washington D.C., one industry in particular stands to grab the lion's share.

And for the investors that get there first, this moneymaking opportunity is one that may just turn out to be the mother lode.

To learn more about the Stimulus Goldmine that could easily double when all of that pork gets spent click here.

Winners in the Obama Energy Revolution

Energy security will be a top priority under Obama's leadership, as he seems to understand the peak oil threat. I haven't seen him rule out any particular kind of energy, or try to pick winners. He appears to be in favor of any and all energy solutions that work, including oil, gas, coal, biofuels and nuclear energy; a wise approach since we will need them all. But he will particularly favor ones that take us down the path to reversing global warming. On that count, I have no doubt that renewable energy and efficiency will be clear winners.

Thermal efficiency is the obvious low-hanging fruit in the energy revolution, though its not a big, sexy, high-tech supply-side solution. Over the next four years, we will deploy Van Jones' caulking-gun wielding army, and outfits like Sustainable Spaces in San Francisco will eliminate heat losses in millions of buildings, saving their owners 10-50% on their utility bills.

With oil and eventually all fossil fuels peaking and going into decline within the next 15-20 years, renewable energy is the future, without a doubt. It will take decades to begin to make up for fossil fuel depletion with renewable energy, so we had better get moving on it. From now on into the distant future, I anticipate a growing commitment to deploy wind and solar, and develop the next generation of renewable energy, including geothermal and marine energy. Batteries and other storage media will receive an enormous amount of attention as we search for a way to buffer the intermittency of renewable energy generators.

Smart grids, high-voltage long-distance transmission, next generation biofuels, biogas, CO2 sequestration—all of the new energy and cleantech technologies that I wrote about with Jeff Siegel and Nick Hodge in Investing in Renewable Energy—will ride the wave of Change.

There are now hundreds of startups working on these solutions. And though the supply of VC diminished during the market crash of the last six months, with a little confidence restored in the economy and in the leadership of our country, it will absolutely flood into these new technologies.

Obama's inaugural address may have failed to live up to the enormously high expectations some people had for some Kennedy-esque sound bite, but I think it sent the right message for this moment in time: We have enormous challenges at hand, but with courage, hard work, and some sacrifice, we can overcome them.

Instead, he gave us a Lincoln-esque moment. One that frankly acknowledged the troubles we find ourselves in and resolved to find a middle way forward, in unity.

I believe and hope that when America chose him to lead us through this dark period in American history, we finally and truly turned the corner on our national energy strategy. We won't make the kind of progress I'd like to see, and it won't come quickly enough to allay my worries, but at least it will be in the right direction.

As Obama himself once said, "If you're walking down the right path and you're willing to keep walking, eventually you'll make progress."

Until next time,

Chris

Energy and Capital

P.S. Most of my readers have recognized that Obama's multi-billion dollar infrastructure plan will open the door for investors. And I know for a fact that most of my readers are positioning themselves in these infrastructure plays right now. Maybe it's time you shared in our success. To learn more about the Alternative Energy Speculator, simply click here.

Future Sources of Energy

Editor's Note:
We've had a lot of great reader feedback over the past few days, and we've decided to launch a special section of our site dedicated to you, the reader. You can check it out here: http://www.angelnexus.com/hub/623. We call it "Discuss Energy and Capital."

You can connect with other Energy & Capital readers, upload photos and videos. . .even start your own blog on our site. We encourage you to give it a try. Our own Chris Nelder started as a reader of Energy & Capital before joining us as a full-time editor. Give it a try!

Now, on to today's article.

One cubic mile of oil would put Manhattan under 150 feet of oil.

It would fill one thousand sports arenas.

It's equal to 1.1 trillion gallons of oil.

And it just happens to be the amount of oil the world consumes each and every year.

Now, I didn't come up with this concept myself. This idea stems from the keynote address at Greentech Innovations, given by Ripudaman Malhotra, Associate Director of the Chemical Science and Technology Laboratory at SRI International.

But the contents of the presentation, and the concept of a CMO, is something I felt was worthy of sharing. I think you'll agree.

So a CMO is equal to 1.1 trillion gallons. But that amount of oil is also equivalent to:

26 billion barrels of oil
6.4 billion tons of hard coal
153 quadrillion BTU and
15.3 trillion kWh of electricity

To put these gargantuan numbers into perspective, one kilowatt hour (kWh) is equal to doing eight solid hours of cardio on a stationary bike. Do that 15.3 trillion times, and that's how much energy the world consumes each year just in oil.

Not all liquids. Not including natural gas. Not with the massive amount of coal.

Just in oil!

Per the IEA's World Energy Outlook last week, annual decline rates will increase in 800 of the world's oil fields from 6.7% today to 8.6% by 2030. Some major fields, like Cantarell, are declining much faster than that.

Certainly our demand isn't decreasing as fast, and oil is finite, so quite literally we're living off an oil inheritance.

Global Energy Consumption: Living Off Our Oil Inheritance

Think of it like this: Oil, along with coal, natural gas, and nuclear, is an inherited resource.

Renewables, including solar, geothermal, wind, and hydroelectric, are considered income sources.

So we've been making constant withdraws from our energy inheritance for years, and will continue to do so, but eventually, that bank is going to run dry.

Renewables, on the other hand, are akin to making deposits. We can use them this year. And again next year. And the year after.

If we consume one cubic mile of oil every year, when taking into account all energy use, we use the equivalent of three cubic miles of oil.

Here's a breakdown of where it all comes from, in terms of cubic miles of oil:

Reduced down to one sentence, 2.63 cubic miles of our total energy use come from exhaustible resources every year. That's 88%, meaning only 12% comes from renewable resources, or income sources.

So we better stop making withdraws and start making deposits, or our inheritance is going to run dry with a lot energy spending yet to do.

If we (the world) continue at our current energy demand growth rate of 2.6%, we'll need another 270 cubic miles oil in total energy by 2050.

Where is all that energy going to come from?

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And while most other investment advisories are getting ripped to shreds, Steve's showing his readers a way to steer clear of the financial melee... and actually profit.

It's a bulletproof strategy giving investors exactly the thing they're looking for to protect and preserve their wealth in today's market: safe, steady income.

To learn more about this winning investment strategy click here.

Fun With Energy Numbers

According to the most recent oil and gas reserve numbers, there are about 46 CMOs of recoverable oil and about 42 CMOs of natural gas. Those 88 CMOs come way short of the necessary 270, and that's if we can recover them fast and cheaply enough.

The next logical option is coal, of which there are 120 CMOs of reserves. But the problem with coal isn't the reserves, it's being able to use them. And with growing limitations on carbon emissions, coupled with long lead times on building coal plants, it doesn't look like coal is going to make up the difference.

To actually get one CMO of energy from coal would required building 2 coal-fired power plants a week for fifty years. That's just for one CMO. We need 270. So coal is out as the savior.

To get one CMO of energy from nuclear power would require building 1 nuclear plant a week for 50 years. We need 270. Nuclear's out, too.

Those are our inheritance sources. What about income sources?

The sun offers 22,000 CMOs of energy per year—more than enough to satisfy our requirements. But, like coal, the problem isn't in the amount available, but in the amount we can actually put to use.

Getting one CMO of energy from solar would require 250,000 roof-top systems to be installed everyday for 50 years, perhaps even more infeasible than the previous options.

What about biomass? Surely we can grow our way out of this mess using alcohol fuels, landfill gas, and wood and crop fuel.

But getting just one CMO of energy from biomass would require 85 times the current one-year production of soybeans. Remember, we need 270 CMOs in a worst case scenario, so biomass potential looks grim as well.

Wind power? One CMO of energy means installing 1,200 turbines a week for 50 years. Ain't gonna happen. And again, that' s for just one CMO.

We're clearly not going to be able to alter the supply side to solve the energy issue. Let's see what the demand side has to offer.

Take compact florescent lights, for example. We can install 100 billion CFLs to reduce energy demand by one CMO. At an average cost of $2.25, we need just $225 billion to get one of the 270 CMOs we need.

The situation is unrelenting, to say the least.

The Way Forward

First of all, we need to start planning in 40 year cycles instead of 4. We've seen how long it takes just to get one CMO of energy from a single resource. Planning needs to commence now, across a variety of technologies, to get us where we need to be by 2050.

But with a decades long energy transition comes a decades long profit opportunity.

Not just in renewables, which will double in use several times over, but also in energy efficiency technologies, smart building materials, innovative ways to use natural gas, and yes, even in new ways to explore and exploit our remaining oil and coal reserves.

As we've seen, there is no one energy savior. Many technologies will be used, and used well. And you can not only reap their energy dividends, but their financial ones as well.

We don't have to make a choice of using and profiting from oil or renewables. The operative word here is and.

That's what Energy & Capital, and our host of sister publications, are here for. . . to help you profit from oil and natural gas and renewables and energy efficiency.

The energy road will be long and arduous, but the path to profits doesn't have to be.

For just one example of how to turn the energy solutions of tomorrow into the energy profits of today, check out this report.

Call it like you see it,

Nick

Crude Oil Forecast

Crude oil forecasts for $150 to $200 oil aside, the Energy Department believes oil prices will fall to $70 a barrel in the next seven years, as production begins in Azerbaijan, Canada, Brazil and Kazakhstan.

But a $70 scenario assumes that OPEC producers will maintain their 40% market share of global oil supply, with plans to invest in additional production.

And from $70, oil is expected to jump to $113 a barrel by 2030, as the market remains "relatively tight," they said. That's a 92% revision from last year's "$59 by 2030" forecast.

But even $113 may be off, as the issue of supply vs. demand force prices higher. It's not speculation sending oil higher.

Even Buffett agrees that it's a supply and demand issue, and not speculation.

"In my lifetime, up until the last year or two, there's been a huge amount of excess supply available," he said. "We don't have excess capacity in the world anymore, and that's why you're seeing these oil prices."

Couple that with news that world energy consumption will rise 50% between 2005 and 2030, as demand in developing countries rises 85% and oil "worst case" scenarios become plausible.

Other Oil Issues...

The weak dollar isn't helping, and neither are OPEC comments that oil could reach $170 this year on currency and geopolitical risks. A falling U.S. dollar makes goods priced in dollars cheaper for foreign buyers, resulting in higher demand.

Threats against Iran over nuclear projects aren't doing much to help. There's a growing fear that in the event of war with Iran, the Strait of Hormuz (passageway for 90% of oil exported from Gulf producers) would be jeopardized. If that happens, we'd see an immediate oil super-spike.

And then there's Libya, which is threatening to reduce production. According to Bloomberg, Shokri Ghanem, chairman of Libya's National Oil Corporation said reductions may be made because of an over-supplied oil market, and in response to Iranian sanctions.

So how do you profit from it?

You buy domestic crude oil and alternative energy companies. Oil is going higher. Nothing is stopping the rise. The dollar is weakening. And inflationary pressures remain tight.

Making these companies even more attractive are the oil and gas discoveries and the fact that domestic explorations are more appealing given geopolitical tension.

Even the President agrees.

"Our problem in America gets solved when we aggressively go for domestic exploration," Bush said.

To protect your portfolio from higher oil cost, diversify with domestic and alternative energy companies, like Royale Energy (ROYL), Marathon Oil (MRO), SandRidge (SD) and the many stocks recommended in Pure Energy Trader, The $20 Trillion Report, and GreenChipStocks.com.

Good Investing,

Ian L. Cooper

——————————————

In case you missed our other investment opportunity highlights, here's what we covered in Wealth Daily, Gold World, Energy and Capital, and your free blogs for the week of June 23, 2008.

Platinum Mining Companies: Zimbabwe Set For a New $400 Million Platinum Mine
Platinum is extremely rare, occurring at only 0.003 parts per billion in the Earth's crust. This makes the most precious of all precious metals about 30 times rarer than gold. In fact, it's so rare that if all the platinum in the world was poured into one Olympic-size swimming pool it would scarcely be deep enough to cover your ankles.

The Big Picture on Q2 2008, Part 2: Commodities and Renewables Charge While Market Tanks
In part 1 of this series, we reviewed the trends in financials, fossil fuels and electricity. This week, we take a look at renewables, food and fertilizer.

Brazilian Ethanol: The Break-Out Brazilian Energy Play
Brazilian sugar refiners are ready to satisfy America's energy sweet tooth. Here's what I mean, and why the Brazilian ethanol recommendation noted below is about to explode.

Investing In Safaricom: The Coming African Stock Boom
Nigeria is mired in oil turmoil, and Zimbabwe's elections just turned bloody again. But regional growth is at 30-year highs and has room to run. That's why today I'm telling you to buy Africa. Across Africa, outbursts and opportunities pose huge potential for risk and reward to the international investors swarming in. Here's how you can make money in African investments.

Investing in Wind Energy: How to Own 52 Wind Stocks for $30
As oil prices stay high, the wind power and alternative energy themes are becoming increasingly popular, making the latest ETF issue even more enticing at $30.

Investing in Electric Vehicles: The DIY Strategy for Energy Price Hedging
If you think $4 at the pump is bad, just wait. It's not getting better anytime soon. By now, we've heard all the reasons for escalating prices: rising demand in India and China, a falling dollar, speculative trading and many others.

Microsoft-Yahoo Deal Back On?: Don't get too excited, though.
TechCrunch is reporting that Yahoo and Microsoft talks are back on. "The information we have is thin, but what one source is saying that Microsoft is talking a price lower than the $33 they were offering when the talks disintegrated in May," the report said.

When Will the Credit Crisis End?: Peak by Q1 2009, says Goldman Sachs
The credit crisis will not peak until the first quarter of 2009, said Goldman Sachs. And, according to the latest Goldman forecast, global financials will need to raise another $65 billion by this time next year to deal with losses.

Dow Does it Again...Tack on Another 25%: Chemical Giant Hikes Prices for a Second Time
The last time I wrote about Liveris was less than a month ago, when he decided that his company had no other choice but to raise prices 20% across the board. His input costs (read the price of oil), he complained had simply become too high crushing his margins.

El Paso Calls Heating Up: Why it's still a buy...
You may want to keep El Paso (EP) on radar. The El Paso August 2008 23 calls are seeing interest with 7,986 call contracts trading hands versus open interest of 69. The spike is being attributed to news that the company has expanded land holdings in the Haynesville shale area. While the stock has since retreated on the comments made at the Wachovia Nantucket Equity Conference, it and the call options are a buy.

How to Protect for Downside
This rally won't last, we said June 12. Bank earnings are next week. The world is on the edge of severe crises. Israel and Iran are ready to fight. Oil is heading up. Gas is skyrocketing. Thousands of homes are in foreclosures. Global banks are struggling. Home equity loans are the new subprime fiasco. Unemployment is rising. Food riots are daily. Bond insurers are losing ratings. Oh, and then there are the hundreds of trillions in derivatives.

Norway's Wind Energy Outlook

Norway sure has its extremes.

The days are getting longer and longer this time of year, evening out the gloomy darkness of the long Nordic winter.

In energy there's balance too. Norway's North Sea oil production is expected to drop by 100,000 barrels this year...

But the Norwegian government and local companies are looking towards a future in another abundant regional energy source—Wind power.

Still, we think they need to do more.

Norway's Wind Energy: Gusts Instead of Steady Breezes

On May 15, the Norwegian Ministry of Petroleum and Energy revised its 2008 budget to include a 100,000 barrel-per-day drop in oil production, down to 2.4 million bpd.

Here's the kicker: Norway's not alone in its decline—the U.K., the largest oil producer in the European Union, peaked in 1999.

In fact, 2007 was the year the U.K. turned into a net oil importer, as field decline rates and increasing fuel consumption put the squeeze on native capacity.

Luckily for the companies bringing North Sea oil up and out of the ocean, record high NYMEX and London-traded crude prices have bolstered the bottom lines of firms like Norway's StatoilHydro (NYSE:STO), a longtime Global Growth Stocks holding (and currently a 71% gain).

But we know $125 oil is only good if you can find the oil to sell, and those days seem numbered in the blustery waters of northern Europe.

It's a good thing, then, that Norway recognizes its wind energy potential.

As Deputy Petroleum and Energy Minister Liv Monica Stubholdt said recently, "Norway is among the (world's) most ideal locations for wind power, both on the coast and offshore."

But progress is moving more slowly than it should for a true transitional energy economy to emerge.

That goes for Norway, and its North Sea neighbors, too.

North Sea Countries Waffling in Wind

Last week, I alerted Green Chip Review subscribers to an unfortunate development in the United Kingdom's movement towards lofty renewable energy targets.

Royal Dutch Shell (NYSE:RDS.A), which along with BP (NYSE:BP) announced record profits in the first quarter, pulled out of an offshore wind farm project that would provide tens of thousands of Greater London homes with electricity.

Germany's electricity giant E.ON AG (OTC:EONGY) also got cold feet on the London Array.

Disappointing, considering the London Array has the potential to power a full quarter of all homes in the capital city area when completed.

And that's just a fraction of the total capacity that could come from Germany, the U.K., Belgium, Denmark and the Netherlands...

The German Wind Energy Institute said in 2000 that the total offshore wind bounty among those five nations is equivalent to five times their total electricity consumption.

Five times!

Yet Shell and E.ON have moved on wind in fits and starts, and StatoilHydro's New Energy Wind division is treading lightly with just a couple of wind farm demonstrator projects.

"Offshore makes sense in a way," that division's project head Jan Fredrik Stadaas says. "It is our area of competence."

That echoes what I heard in my time on the North Sea coast of Scotland, where I met with Norwegian oil rig engineer Gunnar Foss back in 2006.

Foss is involved with Canadian firm Talisman Energy (NYSE:TLM) and a deepwater wind pilot project they are working on, taking offshore structural pointers from the oil industry and moving it to the renewables sphere.

This collaboration is essential and encouraging to us energy investors, but the window for offsetting North Sea oil declines with clean energy advances is closing by the year.

We'll keep track of every turn of the turbines here at Energy and Capital, and tell you how to play the next big move.

Regards,

Sam Hopkins

OPEC: The Oil Cartel

Admit it. If OPEC were a public company, you'd be hard pressed NOT to want to own shares.

The world's biggest cartel is set to bring its members over $1 trillion this year, beating Department of Energy estimates by $150 billion and soaring over last year's net by 57%.

That's stellar performance...

But then again, OPEC's price-fixing ability makes increasing revenue a self-fulfilling prophecy...

Right?

Well, a few major factors could break the cycle:

OPEC members departing the cartel

Non-OPEC oil production rising in places like Brazil, Canada and Kazakhstan

General distaste for price-fixing in politics and public opinion

Whether a perfect storm will uproot OPEC, though, is far from certain.

Indonesia's "Wells Are Drying"

Indonesian President Yudhoyono told the world this week that the country's OPEC membership is in question because, quite simply, Indonesia's "wells are drying."

Indonesia, eastern Asia's only OPEC member, joined the ring two years after it was launched in Baghdad in 1960.

Since then, that country of over 17,000 islands has turned from an export power into a net importer—production declined from 1.66 million bpd in 1980 to 1.1 million in 2006, while daily consumption tripled over the same period.

Economic growth at over 6% a year, even factoring in the 2008 slowdown, means Indonesia has to hold on to what it's got left.

Indonesia has revisited its OPEC membership in the past, but decided to stay on to maintain high-level relations with big-time oil powers like Saudi Arabia. After all, Indonesia has the world's highest Muslim population, giving it another major tie to Gulf exporters.

Indonesia isn't the only country to consider leaving OPEC in recent years.

And declining production isn't the only reason for splitting, as Nigeria can attest.

Low Prices Almost Drove Nigeria from OPEC

It seems like it must have been a previous lifetime, but in 2002 oil was around 20 bucks a barrel.

That's when Nigeria and OPEC were at odds over the country's "undisciplined policies" and production that exceeded daily OPEC quotas by 300,000 bpd.

New Nigerian production was coming online at the time, and national leaders and companies operating there got vexed by low limits coming from OPEC headquarters in Vienna.

These days, Nigeria is making the news with illegal pipeline siphoning and rebel attacks that shut down production and refinery facilities, putting them in danger of under-producing by OPEC standards, and leading to a higher risk premium in futures trading.

Like any club, membership in OPEC comes with commitment, but benefits too. That's why the threat of attrition is balanced by new members who want to tap OPEC"s power and expert-sharing structure.

Ecuador and Angola Come On Board OPEC

Ecuador, South America's second-largest oil supplier to the United States, was a member of OPEC for two decades before leaving in 1992, to produce more oil than Vienna was mandating at the time. Ecuador rejoined under new center-left leadership in 2007, and is now like Nigeria, below quota.

Angola cast its lot with OPEC for the first time in 2007, and the country is now the third largest crude oil producer in Africa, behind Nigeria and Libya. Consumption hasn't grown at such a high rate in Angola as in Indonesia or even Ecuador, because the economy is anemic.

So there's still room for Angola to ramp up output before worrying about domestic supplies.

In non-OPEC countries like the U.S., the situation is one of trying to maximize export profits while turning away from oil for domestic use.

Some experts say what we're seeing now may be the last hurrah for non-OPEC production.

Non-OPEC Production Falters

"No non-OPEC member is in a position to produce more," says energy expert Francis Perrin. "They are selling all the oil they can."

Perrin includes reputed fossil fuel saviors like Kazakhstan's Caspian basin, Brazil's recent deepwater offshore finds, and even Canada's oil sands in that appraisal, saying declines in high-quality North Sea fields can't be offset by hard-to-get, sour crude from the latest sources.

Canada's oil has to be cooked, Kazakhstan's 1.5 million bpd Kashagan field is delayed another few years, and Brazil's Carioca field is in a "pre-salt formation," at depths that have been known to melt even uranium-tipped drillbits.

Companies like Noble Corporation (NYSE:NE), which specializes in deepwater offshore exploration, will thrive in the high-pressure environment.

The Oil Service HOLDRs ETF (AMEX:OIH) is also a great play on rising prices and interest in new resources.

What's more, commodity cartels are coming into fashion, and OPEC is always the reference point (after all, you'd probably rather draw a parallel to OPEC than to Colombian drug lords).

Iran and Russia have been talking about a "gas OPEC" for a couple of years now, and Vietnam is quietly pushing forward with the idea of a five-country Mekong Delta "rice OPEC" as grain prices skyrocket.

To make a long story short, OPEC is widely seen as a model for success with no real rival in the energy world. Until that changes, it's a force we're going to have to reckon with.

Regards,

Sam Hopkins

www.energyandcapital.com

Investing in Wind Energy

"Green doesn't always mean more expensive."

That's what Chief Executive Mark Levin has to say about the matter.

He runs a company called Home Office Solutions Group (HOSG), which sells furniture to small businesses.

The company has reported its green sales are 'going strong', despite an overall decline in average purchases being attributed to what some would call a 'rough patch' in the economy.

In fact, one of HOSG's most popular items is the Think chair, manufactured by Steelcase Inc. (NYSE: SCS).

The chair is made with as much as 37% recycled materials and can be sold at retail for $569. Steelcase's Leap chair—which is very similar, just not green—sells for $250 more.

So you see, green doesn't always cost more.

But recycled materials aren't the only thing making the Think chair green.

Steelcase also has committed to buy all the renewable energy credits generated by a Texas wind farm in an effort to reduce its carbon footprint.

The wind farm from which Steelcase will purchase its electricity was built by a Deere & Co. (NYSE: DE) subsidiary.

All of a sudden we have this green menage from a group of companies that aren't generally thought of as pioneers in the field. And there are plenty of others consdering investing in wind energy as well.

The Growing Use of Wind Energy

That's because companies from multiple sectors are seeing an accumulation of reasons to go green.

For starters, some companies are going green to take advantage of tax credits spawned by legislation on The Hill. Some of those tax credits expire at the end of the year, and companies are hastily implementing projects to ensure they get their breaks.

Even if such projects require a little more up front capital, the long-term benefits are being realized through higher efficiency and lower energy usage.

Plus, more stringent energy legislation is on the way. So some companies—even those formerly opposed to such rules—are taking action to stay ahead of the energy policies they know are in the pipeline.

I'm talking, of course, about laws requiring less emission of greenhouse gases or the increased use of renewables, or both.

Most recently, we saw Ohio enact legislation requiring 12.5% of its electricity to be generated renewably by 2025.

Including Ohio, 29 states have now enacted some sort of renewable portfolio standard (RPS). That's 58% for those keeping count.

Right now, wind energy is the renewable resource of choice for generating utility-scale power.

In 2007, wind generated revenues soared above $30 billion for the first time. That number is expected to grow 177% in the next ten years to $83.4 billion.

Just last year the U.S added 5,244 MW of new wind capacity—a 45% expansion. Total installed wind capacity now stands at 16,819 MW, with another 3,626 under construction.

Wind Energy Investing: The Foreign Winds are Blowing

What most don't know is that the domestic wind energy market is currently being dominated by overseas players.

With the exception of General Electric, foreign competitors—mostly from Europe—have taken a strong position as wind market leaders.

Because of their early aggression in tackling environmental issues, it's no secret that European firms have led the way in many renewable technologies. Their cavalierness has led Germany to be the cradle of the solar revolution, the Scots to take the lead on wave power and a Portuguese/Spanish/Danish tandem to lead on wind.

Last year, Energias de Portugal—the national utility—bought Horizon Wind Energy from Goldman Sachs for $2.15 billion—the highest price ever paid for a wind-only company.

For its part, Spanish company Acciona acquired rights to about 1,300 MW of wind farms in the Midwest.

But the U.S wind market isn't the only one that's booming. Europe still has billions to claim as well.

In its most recent report, the European Wind Energy Association (EWEA) said that wind became the leader in terms of new installed energy capacity.

Through 2020, wind is expected to account for 34% of new generating capacity. It'll account for 46% from 2020-2030.

And the goal of attaining 12-14% of Europe's power from wind by 2020 is well within reach.

By 2020, it's expected that 180 gigawatts (GW) of electricity will be supplied by the wind—enough for about 107 million European households.

For that to happen, wind-based capacity needs to increase 9.5 GW per year through 2020. That shouldn't be too hard, considering the EU installed 8.5 gigawatts worth of wind capacity last year.

In addition to the companies mentioned above, Green Chip International has its investment portfolio primed to take advantage of all growth in the wind industry—no matter where it happens.

The portfolio includes a global clean energy ETF and three foreign-based companies with significant wind exposure, amons several others. All are set to capitalize on the coming growth in the global wind business.

But the one I'm most excited about is going to release its first quarter earnings this Thursday.

Company revenues are expected to rise nearly 20% and net profit is forecast to rise 135% over the same quarter numbers from 2007.

When these numbers come out, I assure you investors will go crazy. Some analysts are predicting a target price some 23% higher than it is now.

This is surely a company you want to be invested in before the first quarter numbers are released. As I write this, the price is already starting to tick northward.

But only Green Chip International members are going to be privied to the information needed to profit from the company that's as close to a sure bet as it gets. So become a Green Chip International member today!

Call it like you see it,

Nick

Russian ETF

Russia is the dominant natural gas exporter in the world, with the largest endowment of the fuel in its territory.

Natural gas prices are up (rising over 90% in the U.S. since August 2007), and so is its popularity as energy icons like T. Boone Pickens are pushing for liquefied natural gas to become a viable transportation fuel to replace refined oil.

Below, I'll tell you about a Russian ETF that is capitalizing on Russia's prime position in the important international natural gas trade.

First, check out the following chart on natural gas futures.

As you can see in this chart, natural gas prices run in cycles. But the trend is heading up.

You see, leading European consumers are eager to secure steady supply on favorable terms, which means dealing with Russia. For years, that has meant dealing with one leader—Vladimir Putin.

That's about to change when a new president takes power May 7.

President-elect Dimitri Medvedev's first official trip was announced this week, and it will take him to Russia's two biggest neighbors and major energy allies, Kazakhstan and China.

Kazakhstan is expected to come out with at least a jump of 1 million barrels of oil per day after 2011, and China is the world's second largest energy consumer, with a growing appetite for natural gas that pollutes less than coal.

But right now, current President Vladimir Putin is putting ink to paper in Greece, a country that doesn't even border Russia, and was never a Soviet satellite state. Greece will however be an integral part of Russia's export future and a key transit point for European energy.

Russian Natural Gas and the South Stream Pipeline Project

The South Stream pipeline project, which will carry some 10 billion cubic meters of natural gas through Greece every year (of 30 billion in potential capacity), is a joint venture of Russia's gas export monopoly Gazprom and Italy's energy titan, Eni.

From a Russian compressor station, natural gas will be pumped under the Black Sea to Bulgaria, and then overland to Greece and Italy.

And it turns out that, when all is said and done, Medvedev's first jaunt as president to Kazakhstan and China, and Putin's Mediterranean connection in his closing days may not be so far apart in terms of Russia's national economic interest.

Buried in the news reports of Tuesday's Russian-Greek bilateral agreement on the South Stream pipeline was a hint that Central Asian gas would soon be transported through the conduit, in addition to original Russian fuel.

"Central Asian" is code for "Kazakh" in energy circles, because Kazakhstan is one of the last and best hopes for traditional fossil fuel.

By bringing millions of barrels of oil online, Kazakhstan is sure to see gas production ramp up as well. After all, the new wave of fossil fuel production and profit means new facilities built in the country may take advantage of gas byproducts rather than burning it off in wasteful flares.

And with tight connections confirmed by a new Russian president, even as the old one hangs around, Gazprom's got the bead on Kazakh gas, making it not only a Russian gas export giant but a king in international transport as well.

The Russian ETF on a Long Run

... Which leads me to why I'm sticking with my recommendation of the Market Vectors Russia ETF (NYSE:RSX).

The RSX ETF has continued its rise since I last told you about it in March, not rising directly in line with natural gas prices but certainly tied to fuel. The Russian ETF's top holdings include:

Gazprom
Rosneft (Russia's national oil exporter), as well as
Nickel giant Norilsk... and a few non-resource plays like mobile phone service provider Vimpel (NYSE:VIP) to boot.

You can bet on the RSX ETF, with Russia poised to maintain its perch on top of the world's natural gas industry.

Regards,

Sam Hopkins

Investing in CNG

Imagine filling up your tank for $5.

That's what some car owners are doing in Utah, where gas is selling for $0.638 per gallon.

The only caveat: it's compressed natural gas (CNG), not the unleaded liquid stuff we're used to.

According to the Natural Gas Vehicle Coalition, Utah boasts the country's lowest rate for the increasingly popular fuel. But no matter where you buy it, CNG is undoubtedly cheaper than the national average price of $3.60 for regular unleaded.

So you can see why the fuel—and the cars that burn it—are rapidly growing in popularity. Private ownership of natural gas cars and trucks in Utah has grown from basically zero to over 5,000 vehicles in just a few short years.

Use of the fuel is growing so fast that Utah's 20 public CNG stations are struggling to keep enough in supply. Fleets requiring CNG, including a local Coca-Cola distributor, may find it easier to come by at the state's 71 private fueling facilities.

Markets & Incentives for CNG

Of course, Utah probably has the cheapest CNG prices in the nation. But even in California, where the price stands at about $2.50 per gallon equivalent, the novel fuel is a bargain.

Still, the cheap prices haven't kept Utah-based utility Questar Corp. (NYSE: STR) from turning a tidy profit. Questar is the cheapest provider of natural gas in the continental U.S. And it can offer CNG at even lower rates thanks to federal tax incentives.

But don't let the cheap price of their product fool you. Questar stock has climbed 29% in the past three months. And if the current trend is any indication, this one is going to go higher. Take a look at the upward trend the company has been in for years:

You see, the utility isn't the only attendant at this natural gas party to receive incentives. Purchases of new, qualified used and some converted vehicles are also eligible for federal and state tax incentives—some up to $7,000. In many cases, the $7,000 incentive is enough to offset the associated premium of buying a CNG-fueled vehicle.

Right now, new CNG vehicles are only available in New York and California. And only one company, Honda Motor Co. (NYSE: HMC), is making them.

According to company executives, they can't make the specialized vehicles fast enough. Nonetheless, they're fast-approaching making new CNG vehicles available for sale in Utah to capitalize on the booming market.

Until then, consumers are doing all they can to get their hands on used CNG vehicles and to convert regular gasoline engines to run off the stuff.

Can you blame them? With oil less than a dime away from $120, you can bet the nascent natural gas vehicle market is on the cusp of exploding.

Investing in CNG

There are a number of ways to get a leg up on this emerging market. And they don't have to be strictly CNG-related.

As you may know, CNG is just a storage option for natural gas. Made mostly of methane (about 75%), natural gas can be stored in its original gaseous state or it can be liquefied (LNG) or compressed (CNG).

So at this point, any exposure to natural gas is probably good exposure.

Natural gas contracts for June 2008 have climbed from around $7.33 per million British thermal units (MBTU) to over $11.00 in the las five months or so.

One way to get in is through a sure bet like the aforementioned Questar Corp. The company is in a serious uptrend that I think will only go higher along with demand for more economical and environmentally friendly fuel and vehicles.

I've also talked to my colleague Keith Kohl about natural gas stocks. Without hesitation, he offered Range Resources (NYSE: RRC) and Chesapeake Energy Corp. (NYSE: CHK) as two of his favorite plays.

Both have been going gangbusters lately and are well-established companies in the sector.

But there's a younger company that could soon explode the way Range and Chesapeake have.

It's a manufacturing company with an engine that runs off CNG. The company has been loading up contracts from city and state fleets around the country.

And I want you to have first crack at it. All the details are included in this full CNG report.

Call it like you see it,

Nick

China Coal Crisis

How much energy do you need to make it through a couple of weeks?

After you're done figuring in the work commute, taking the kids wherever they need to go, and assuming you like to see what you're doing at night, the average U.S. household goes through about 350 kilowatt-hours in 14 days.

This spring, Chinese consumers are frantically tallying their own fortnightly consumption, because the national coal stockpile has shrunk to only enough for 15 days.

And that's the best-case scenario according to some in the Middle Kingdom, where coal is the only royalty left.

Vice President of the national electricity regulator, Wang Yeping, and the head of China Power Investment Corporation, Liu Shuo, both told media that the real reserve number may be down to a mere 7 days.

One week of the primary energy source for an economy growing steadily in double-digits per year!

Now tell me we're not in an energy crisis.

China's Coal Crisis Persists

The United States Department of Energy says that worldwide coal consumption is expected to increase by 74% from 2004 to 2030, with coal trade jumping by 44% in about the same time span.

Contrary to popular belief, the world isn't trending away from coal consumption as we undergo a clean energy epiphany.

The DOE reference case has coal use increasing as a percentage of total energy consumption, up to 28% in 2030 from 26% today.

China plays a large part in that rise, it being in the process of constructing more than 500 coal-fired power plants to fuel greater demand for electricity in private and public applications.

After all, it's not just new skyscrapers and their microwave-happy denizens chugging juice—it's streetlights and Olympic sites too.

Plus, hundreds of millions of rural Chinese have yet to gain their first grid access, meaning the strain will increase.

This winter I wrote about the clogs and chaos at train stations across southern China, the result of winter snows that halted transport routes for people and materials alike, creating a coal crisis.

One local official in the province of Guangdong rejoiced at the time when he found out that coal cars were arriving in the capital of Guangzhou for the first time in weeks.

"We now have a full 10 days' supply of coal!" he beamed.

Here we are months later, with the mildest weather in the year, and China is back in the same sooty situation with no blizzard to blame.

Though China has the world's #3 coal reserves and the DOE predicted in 2007 that primary coal consumers should be able to subsist mostly on their own national mining.

China gets 78% of its power from coal, and government regulations are trying to make mines more secure and dial down the thousands of deaths a year in mom-and-pop collieries across the country.

Combine greater regulation with tightening supply, and you get price pressure that squeezes China's power margins too close for comfort.

First the Torch, Now the Streetlights?

China's dream-turned-nightmare in 2008 may have only begun when several protesters flung themselves at torch runners and managed to put it out several times.

Can you imagine what havoc rolling blackouts would wreak in any of the six cities hosting events?

The government has some $1.3 trillion in foreign currency reserves, and it launched the China Investment Corporation last year to spread some of that around to buffer against the dwindling dollar.

But CIC's $3 billion stake in private equity group Blackstone's IPO shed over $1.2 billion in value from May 2007 through February of this year.

Early February was the thick of the China winter coal crisis, too, and I said at the time that China's reserves would be better spent securing coal supply, namely from nearby Australia, rather than buying into a real estate IPO at the top of the market as CIC did with Blackstone.

The Shanghai and Shenzhen stock markets tanked in turn, leaving few sure things in China's investment purview.

Except energy, that is.

Coal Continues to Run

Bloomberg says the price of Asian benchmark coal is up nearly 50% this year alone. That and food commodity pressure is leading to price inflation across the economy that is at the highest level in more than a decade.

Coal stock prices are also escalating, delivering handsome returns to readers who bought my recommendations the last time I related China's energy woes a few months back.

Every single one of the companies I told you about on February 6 on has delivered whopping returns:

China's Yanzhou Coal Mining (NYSE:YZC) dipped with the local market but is now in the green, and Swiss-based Xstrata (LON:XTA) gained a solid 17%. Aussie coal company Coal & Allied Industries (ASX:CNA) gained nearly 40% in 3 months, and New Hope Corporation (ASX:NHC) is up 113% since late January.

This time, I want you to take a good look at the Market Vectors Coal ETF (NYSE:KOL).

KOL has just broken to new highs and is a good buy on dips as we've seen a 22% uptick since just one month ago.

China won't let the energy run out, and you should make sure you pack your portfolio with coal, too.

Regards,

Sam Hopkins

Green Energy Stocks

Denmark is quickly becoming a heavyweight energy force.

Meanwhile, other economies, namely the U.S. and China, are scrambling all over the world to buttress themselves against the weight of peak oil.

But in this age of fossil fuel panic, consider that the Danish enjoyed 75% economic growth from 1980 to 2007 while keeping energy consumption growth down to 6%.

In the meantime, Denmark's showcase alternative energy stock, Vestas Wind Systems, has become a domestic blue chip along the lines of IBM or General Electric.

If you're serious about making money in the new energy economy, you must understand companies like Vestas and the national support that has allowed them to maintain stellar growth.

Here we'll look at a few key features of blue chip green energy stocks.

Green Energy Stocks on the Rise

Renewable energy stocks that are worth putting your money in for the long term are:

Heavily traded on their home exchanges
Secure in their basic commodity supplies (esp. in the case of solar PV), and
Look abroad for a significant portion of their growth

By virtue of its small size and central location to European economic giants like Germany and the United Kingdom, Denmark has devoted itself to pioneering advances in wind energy.

Danish Minister for Climate and Energy Connie Hedegaard told a gathering of offshore wind energy heavy-hitters in Berlin last December that her country's wind energy industry has delivered 90 percent of the world's total installed offshore capacity.

Vestas, in turn, has enjoyed remarkable and unfettered growth. Vestas has been able to boost its earnings at a terrific pace, rising from 201 million euros in 2006 to 443 million euros in 2007... that's a 120% increase!

Take a gander at Vestas's Copenhagen share price over the past five years:

And from March 1998 to March 2008, Vestas's share price logged a 1,695% gain!

This is exactly the green energy blue chip stuff I'm talking about.

And there's plenty more where this came from, if you know where to look and what sinkholes to avoid.

Day Traders Don't Get Green

One of the worst things to hit many true investors' opinions of green energy stocks is the amount of volatility that we're seeing in today's overall market (the Chicago Board of Options Exchange Volatility Index keeps setting higher support levels), and the added factor that thinly-traded energy startups on the OTC and pink sheets are often subject to the whims of day traders.

Many of these chart jockeys don't understand a tenth of what goes into building a renewable energy company, so shares get tossed to and fro and unwitting buyers can get stuck with dud shares that are almost impossible to get rid of.

What's worse, some traders whose first fortunes were made in the dot-com boom have a tendency to blend clean energy technology stocks with computer-based tech companies. That means that from time to time clean energy companies that supply the core micromechanical elements of things like wind turbines and solar panels get dragged down with shabby news in the semiconductor industry.

Don't get me wrong—the cleantech overlap can be very real, like with the increasing competition between solar panel manufacturers for silicon supply, which of course is also key to microchips.

In most scenarios, however, someone rings a "tech" bell and these dogs salivate, getting their 5% in-and-out trade and leaving chaos in their wake.

If you're in it for long-term appreciation and know how real the worldwide renewable energy bull market is, you want to go abroad where government's like Denmark's and Germany's are sowing the seeds of green energy independence and economic health.

The most promising trend today, in fact, is the systematic reduction of government subsidies in these countries where price guarantees for clean energy producers has stimulated the growth of Vestas and others.

We're now seeing that mold stripped away, leaving strong companies like Vestas that are fit for a new energy age.

Regards,

Sam Hopkins

P.S. A combination of trading skill and clean energy expertise has returned outstanding gains to Green Chip Stocks and Alternative Energy Trader subscribers, avoiding the pitfalls of bulletin-board knee-jerks. Our stocks have significant basic material stockpiles, heavy trading volume, and aggressive overseas expansion.

But for long-term investors, Green Chip International is finding "Green Chip Blue Chips" like Vestas all over the world. In fact, we've just issued a new "buy" on a company with just the kind of solid international growth we're targeting. To learn more, click here: http://www.angelnexus.com/o/web/5072

The Chevron Commercials

"Oil, energy, the environment. It is the story of our time."

Those are the words that begin the now-famous Chevron (NYSE: CVX) commercial alerting the public that an oil company can be a part of the solution.

I'll get to the semantics of why that doesn't work in a moment. For now, let's deal with the opening quote.

Oil, energy and the environment are indeed the stories of our time. Just on my way to the office this morning I listened to:

An NPR Climate Connections story about urban sprawl and the associated rise in fuel and energy consumption,
A radio blurb about rising energy costs, and
A story about the local utility (BGE, a unit of Constellation Energy) being forced to give its customers a rebate per a settlement reached with the state of Maryland.

With the issues so prevalent, there are certainly numerous ways to profit. Let's delve into a few, using the Chevron commercial as a catalyst.

Oil and Energy

Although many think so, oil and energy are not synonymous. This is a point I recently argued in a piece about cleantech's correlation to oil prices.

You see, as ubiquitous as oil is, its primary uses are for transportation fuels, chemicals and plastics. Of course, those uses are extremely important and--at least for now--they're things we've become critically dependent on.

Yet narrowly defining oil as energy only causes convolution. Imagining--as the commercial suggests--an oil company as part of the solution does more to foster confusion than to provide any real insight.

By definition, a company that is touting its activities in solar and geothermal isn't an oil company at all. It's an energy company.

The Chevron Spin Factory

Basically, what Chevron is telling us is that the oil era is coming to an end, though Peak Oil and climate change are never mentioned. The company is not saying it's pursuing clean energy because it's the right thing to do. They're doing so just to stay relevant in a rapidly evolving energy economy.

The question then becomes: will Chevron (and other "oil companies") be able to evolve fast enough? Or will they be leap-frogged by other, pure renewable energy companies?

Well, as many will tell you, it's hard to say. But the sheer notion that an oil company has to drop millions to tout its clean credentials tells us that they know the world is headed down the cleantech road.

And while they drag their feet in getting there, trying to squeeze out every last barrel of profit (and they'll be successful, at least in the short term), the energy market will eventually pass them by.

Obviously, spending only $2.5 billion on clean energy research while spending $15 billion to buy back their own shares, is the tell-tale sign this oil company won't be part of the solution.

Perhaps comedically, they've spread their (natural?) resources too thinly. One company can't reign supreme in each of the numerous facets of the energy industry. You know the old saying: jack of all trades, master of none.

So don't buy the hype of Chevron the Energy Company when, even while trying to brand themselves as such, they still call themselves an oil company.

There will, however, be a profitable merger of energy technologies for some time going forward.

Sure, there's still money to be made in oil. But what my colleague Jeff Siegel refers to as a new generation of wealth will only be available to those investing in green chip stocks.

You can read about those opportunities three days a week simply by signing up for the FREE Green Chip Review.

The Environment

More and more, effects on the environment are being calculated in to the cost of energy.

In fact, just a few months ago three of the largest investment banks (Citigroup, Morgan Stanley, and JP Morgan Chase) announced the formation of "Carbon Principles"--a set of guidelines the banks will follow when lending money to carbon-intensive projects such as coal-fired power plants.

Of course, we'll still be burning coal to produce electricity for the next several decades. Just as we'll still be using oil for limited applications.

What will change is how we use them. We'll be using more efficient engines. We'll blend gasoline with biofuels. We'll be capturing the noxious gases from the flues. All while significantly increasing the amount of energy we get from renewable resources.

You see, it's not just about energy. It's about efficiency as well. It's not possible to simply wean ourselves off fossil fuels overnight. There will be a series of transitional technologies that help usher in the switch.

And it's possible to take those to the bank as well. Just last week, legendary oilman T. Boone Pickens was on CNBC touting the benefits of his natural gas company, Clean Energy Fuels (NASDAQ: CLNE).

While still a nonrenewable fuel, natural gas is cheaper, burns cleaner and can be domestically sourced. So using it as a transportation fuel helps limit the adverse effects on the environment while reducing dependence on foreign oil.

T. Boone, of course, is a master of making money in the oil sector. But even he knows that isn't the path forward.

He has the same investment philosophy as the Alternative Energy Speculator: let's make money on cleantech investments and the stop-gap technologies being used to limit our fossil fuel use and make it cleaner.

If he really thought oil companies were the way forward, he'd still be pushing that front instead of founding natural gas fuel companies, water companies and, most recently, announcing intentions to build the world's largest wind farm.

You too can profit like Pickens. To learn how, check out this lucrative way to profit via natural gas-fueled vehicles with the Alternative Energy Speculator.

Until next time,

Nick

www.energyandcapital.com

Oil in Egypt

The main military obstacle to new oil discoveries in today's Middle East isn't the work of insurgents.

This one's on the Nazis.

The deserts of North Africa, where some of the fiercest battles of World War II were fought, are now the last frontiers of light, sweet crude. Libya has shown the area's potential, with that country now officially holding Africa's largest proven crude reserves (41 billion barrels).

Meanwhile, right next door in Egypt, bountiful underground oil is buried under 22 million land mines courtesy of the Desert Fox, Gen. Erwin Rommel, and his enemies in the British Eighth Army.

But the road to investing in Egypt's oil and their energy-fed economic boom is getting clearer by the day.

Win Big When the Next Domino Tumbles

First there was housing... then the banks. And after that it was the automakers that came crashing down. Next up is a Commercial Real Estate Crash.

And unfortunately - just like the rest of them - the government's last-ditch efforts to prop up this domino are all doomed to fail.

But a 372-year-old investing technique is the answer to it all. And it might not only save your portfolio during this $1 trillion crisis... but also make you a fortune!

To learn more about this moneymaking opportunity click here.

Access to Oil in Egypt Blocked, But Stock Market Still Rallies

Leading German news magazine Der Spiegel recently ran a feature on Egypt's northwestern region, where the pivotal battle of el-Alamein was fought.

There, towards the Libyan border, 4.8 billion barrels of oil lie underground . . . and just 13% of the landmines in the area have been cleared.

"The mines," national landmine clearing director Fathy el-Shazly says, "deny access to approximately 22% of the national territory."

Nevertheless, the Egyptian economy is growing rapidly, drawing more international investment than ever before.

The Cairo Stock Exchange main index has enjoyed a more than 400% increase in the past five years to a market cap of more than $150 billion, and the exchange group is about to launch an ETF on Wall Street based on the CASE 30 index of blue-chip Egyptian stocks.

The land of the Pharaohs is drawing more and more energy exploration in the age of Peak Oil, and leaving one-fifth of the country closed to capital is an untenable situation.

Egypt is itching to move forward, since the hydrocarbons in just that one area would boost Egypt's oil reserves to par with those of the southwestern African nation of Angola, which is a member of OPEC.

In the meantime, the country is asserting its resource wealth in other ways.

LNG Business Rising Rapidly; Egypt Oil to Follow

Strategically located on the Mediterranean and the Suez Canal, Egypt is a western-friendly country that straddles a major chokepoint in world fossil fuel transit.

This is important because Egypt can help mitigate some of the risk of Iran's threats to the Strait of Hormuz, which leads out of the Persian Gulf.

The U.S. Department of Energy says Egypt is now the sixth-largest liquefied natural gas producer in the world, bursting to that rank just since 2005, when its first LNG export terminal came online. And Egypt holds 58.5 trillion cubic feet of proven natural gas reserves, so that power trade is just getting started.

What's more, T. Boone Pickens, a titan of the energy investment world, is backing LNG as an alternative transportation fuel as oil rises further and further. LNG has huge potential as an alternative fossil energy source going forward.

No wonder, then, that BP (NYSE:BP), Italy's Eni (NYSE:E), BG Group (OTC:BRGYY), and a slew of other international energy companies have gotten in on Egypt's LNG projects, putting them in prime position to take advantage of future oil development, too.

One Egyptian oil field has even been developed near el-Alamein in the Qattara Depression, where geological features that were treacherous to tanks have been a boon to oil exploration, since Qattara is mine-free.

Egypt's investment landscape is just as promising to those who know the terrain. The Egypt ETF, set to launch in the second quarter of this year, will be a magnet for investors who want a piece of the country's progress.

We'll be watching for direct plays as old mines are cleared in the northwest, and new opportunities are set in their place.

Regards,

Sam Hopkins

International Cleantech Investments

Like every year, I went out for a couple of beers this St. Patrick's Day.

I'm normally a Guinness drinker, but this March 17, I opted for a brew that's a little less like crude oil or coffee, opting for an Irish red. As I enjoyed my pints, I took in the bar stool news of the day.

"Man, did you hear about that big bank going down?"

"Yep, what a mess!" his buddy replied, referring to the Bear Stearns nosedive, "but I'll be damned if gas prices aren't going up!"

My fellow Saint Pat's patrons captured today's economy in a nutshell. There are two sure paths to profit in this market:

International growth as the American financial system tries to steady itself, and
The unstoppable fuel rush that's stimulating every energy sector in this era of $100+ oil.

Let's look at a burgeoning market that lets us play both of these monster trends at once, with international cleantech investments.

The Best Energy Investment of 2008

Forget about Three Mile Island, Nuclear Power is making a comeback for the ages. And for investors, that is one trend that is impossible to ignore.

Better yet, we have identified the one company with virtually a monopoly in the industry and its share price could easily double... even in a bear market!

To learn more about this Nuclear Monopoly click here.

Renewable Energy Attractiveness Index

Once a quarter, accounting firm Ernst & Young's U.K.-based Renewable Energy Group releases its Renewable Energy Attractiveness Indexes... one for the United States and one for the entire world.

These rankings give us a quantitative glance at just how enticing it is for alternative energy companies to do business in markets as diverse as California and Turkey, and the outlook should give energy investors plenty of confidence moving forward.

First off, the picture in the U.S. is not bleak when it comes to renewables. On the international scale, the U.S. is listed as the most attractive market for renewable energy, but Washington lost us a few points when renewable energy targets were removed from the late-2007 Energy Independence & Security Act (the "Energy Bill").

It may surprise you to know that in second place you won't find Japan, the world's number-two economy. Nor is any of the BRIC countries (Brazil, Russia, India and China) the runner-up in E&Y's All Renewables Index.

It's the other member of the post-WW2 world's most ironic financial triumvirate: Germany.

As "by far the largest market for solar power," in Ernst & Young's words, Germany is credited with not only setting its total power generation targets above the European Union goal of 20% by 2020 (Germany has upped the ante to 27% by 2020 and 45% by 2030), but also crafting the country's Renewable Energies Heating Law, which mandates that all new buildings after January 1, 2009, must be built with renewable energy heating systems.

That change is expected to save Germany $73.9 billion in heating costs by 2020, according to Ernst & Young, and I guarantee you that well-placed companies are in for billions in contracts along the way.

Get Ready for the Cleantech Wave

Here in the States, there's a happy flipside to high gas prices, messy political situations in most of the oil-producing world, and a post-industrial "knowledge-based" economy centered on Silicon Valley and Wall Street. You see, clean energy technologies are drawing expert engineers and seasoned venture capitalists in droves.

The National Venture Capital Association and Thomson Financial say that in just the first three quarters of 2007, U.S. venture capital flowing into cleantech and clean energy start-ups increased to $2.6 billion, up from $1.8 billion in all of 2006.

And from year-end '06 through today, we've seen a barrel of oil skyrocket from $58 to $109--an 88% jump. With each $10 plateau, new energy options become viable.

Even Saudi Arabia's Oil Minister Ali al-Naimi said in early March that alternative fuels will keep oil at a minimum of $60 to $70. "From now there's a line below which prices won't fall," he said, confirming the bull market for cleantech as he spoke for fossil fuel's heartland.

Silicon Valley's biggest names recognize the renewable energy reality, too. Last week, Silicon Valley lobbying group TechNet put its yearly suggestions to Congress, with members like Cisco and Intel CEOs as well as financial heavy-hitters from JP Morgan listing clean energy technology as a top concern.

In its "2008 Innovation Policy Agenda," TechNet asks Congress for a major national push with a Green Technologies Initiative. As the group's position paper requests, Congress should:

Promote and highlight new technologies and innovation as a critical part of the solution to national security, economic competitiveness and global energy and environmental challenges and encourage a national commitment for investment in and adoption of innovative green technologies. In addition, encourage public policies, best practices and initiatives to spur the development and adoption of new technologies to enhance energy efficiency, encourage use of renewable energy and protect the environment.

What they leave out is the multi-billion dollar bull market in renewable energy technology that this will create, giving investors an angle not only on new energy but also the tech sector, with hearty international exposure to boot.

Energy and Capital editors Jeff Siegel, Nick Hodge, and I are all working on a new service, Green Chip International, specifically to capitalize on this tidal wave of opportunity.

Stay tuned,

Sam Hopkins