As the markets get all giddy about the prospect of a ten dollar pullback in the price of crude, it is easy to be conned into thinking that "this too shall pass."
But the larger truth is that in less than two weeks we have gone from an "oil is a bubble" theme to having "America's Oil Crisis" splashed all over the screens on CNBC. It was as if crossing the $130 mark on oil was akin to crossing the Rubicon.
You may remember the story of the Rubicon.
It was the 49 BC crossing of a small stream in Northern Italy by Julius Caesar and his army which made a bloody civil war all but inevitable for ancient Rome. Crossing the stream Caesar remarked "A lea iacta est" or "The die is cast."
Of course, it is otherwise known as the point of no return.
That has put alternative power sources such as nuclear energy on the uptrend as investments while the energy complex climbs higher across the boards.
That is what the energy markets are actually pricing these days as they come to realization the peak oil isn't just the work of some lunatic fringe, but is real.
Setting the Stage For Nuclear Energy: Peak Oil is Confirmed
Case in point...
Just last week the Paris-based International Energy Agency (IEA) made an announcement that shook the energy complex. The group stunned the markets when it revealed that is preparing a sharp downward revision of its oil-supply forecast.
And while its findings won't be released until November, the message of the group was crystal clear: Crude-oil supplies are far tighter than previously thought.
That was a stunning reversal for a group that had basically predicted that supply would meet demand on into 2030.
Instead the IEA now worries that oil supply will struggle to break over 100 million barrels a day over the next two decades due to peak oil production declines.
So in short, according the IEA, supply is going lag far behind demand unless major investments in the energy complex are quickly made. That is easier said than done.
Fatih Birol, the IEA's chief economist, said the hurdles already look high. "One of our findings will be that the oil investments required may be much, much higher than what people assume," he said. "This is a dangerous situation."
So how much investment does the IEA think that it will take to the fix the latest energy crisis?
Well here is what they said last year as the problem became more apparent to them.
According their World Energy Outlook report, "Some $22 trillion of investment in supply infrastructure is needed to meet projected global demand."
Now think about figure for a moment because it is as enormous as it is mind boggling.
And now consider this: That was long before Fatih Birol suggested a new math in the infrastructure spending projections last week!
So in reality, $22 trillion is just the starting point on a journey that could easily be double that before it is all said and done.
Either way, that's enough needed investment in the energy complex to keep it going for many, many years to come. That's why I am so bullish on all things energy.
Bullish on Nuclear Energy Investments
That list includes nuclear power, even though taking a position against nuclear power has been quite easy over the course of the last 28 years. The memory of Three Mile Island looms large.
But despite the long shadow cast by those huge cooling towers in Pennsylvania, the time that has elapsed since then has given new birth to an industry that so many learned to fear.
In fact, according to a report by the Nuclear Energy Institute (NEI), 17 companies have filed applications to build as many as 30 new plants in the U.S. Additionally, virtually every one of the 104 existing nuclear plants is expected to renew its original 40-year operating license for another 20 years.
Given our long memories and disdain for all things nuclear, how could this happen?
The answer, it seems, is simple: our fears of global warming, terrorism and peak oil have combined to overcome our misgivings about the dangers of the technology. In view of these new global realities, nuclear power just makes more and more sense
After all, our energy dilemma is inescapable, bordering on crisis. At current levels, America guzzles more than 15 million barrels a day of foreign crude and petroleum products. Add to that the massive increase in energy use by both China and India, and the results are clear—the world must somehow find a way to produce the oil equivalent of over two Saudi Arabias in the next 20 years, just to meet the predicted uptick in demand.
Even more worrisome than a supply squeeze, however, is where it all comes from. To feed our thirst for oil, we are increasingly at the mercy of corrupt and dangerous regimes. In fact, a quick look at our list of current suppliers reads more like rogue's gallery than a list of trusted friends.
The combination of these factors has led to increasing support for nuclear power here at home, especially from conservatives. They argue that not only will nuclear power help solve our future supply problems, but it will also lessen our dependence on foreign oil and weaken our terrorist enemies.
Joining these conservatives at the nuclear table, though, are some unlikely allies-the Democrats. They have added a twist of their own. Surprisingly, they now argue that electricity generated from nuclear power could be the key to reducing the harmful emissions that cause global warming.
In fact, some election observers now believe that the promotion of nuclear power has the potential to be a big issue in the 2008 presidential campaign. If that happens, it will be a stunning reversal of fortune for an industry that had to fight tooth and nail just to survive over the last two decades.
Nuclear Energy Powers the World
But as the political realities spur a nuclear power rebound here at home, we will merely be catching up to the rest of the world. Because while America has allowed its nuclear industry to wither on the vine out of fear, the rest of the world moved ahead.
According to the NEI, as of March 2008, 30 countries worldwide were operating 439 nuclear reactors for electricity generation. Moreover, 35 new nuclear plants are currently under construction in 14 countries.
In fact, nuclear power is so important to the world's energy supply that ten nations get at least 40% of their electrical power from nuclear reactors. France leads the way with nearly 79%.
That's an energy plan that is completely within reach.
So with the new realities both abroad and in Washington, DC, the U.S. seems destined to return to its nuclear powered past, even if it means getting past our fears from 28 years ago.
Next week we'll take a deeper look at the companies that will get us there.
Your bullish-on-energy analyst,
Chief Investment Analyst
The Wealth Advisory
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