Wednesday, April 30, 2008

What Will Become Our Alternative To Oil?

With the price of oil hovering around $120 a barrel, there is talk coming from seemingly every direction proclaiming that we need to find an alternative to oil, but talk and reality are two different things. So on what can we hang our hopes?

There are several alternative energy sources out there, but most of them have little to no chance of becoming our long term solution. The one the White House has been backing is ethanol, but recent studies and food prices have shown the vast weaknesses with it. So we know for sure that ethanol (at least the food-based version) is out, but what else do we have?

There is a lot of talk about hydrogen, clean coal, natural gas, nuclear and even non-traditional oil sources, but alas all of them have major weaknesses. There appears to be no perfect solution to our oil dependence. Among these alternatives, to my mind the best solution involves a heavy dose of nuclear energy, but the cost and time frames involved can be prohibitive.

The idea of nuclear power itself is great, but what about all the radioactive waste produced by the plants and the major security risks involved? These are a couple of the big questions brought up by nuclear power opposition, and until recently there really wasn’t a good answer. Not too long ago I came across a company that is working towards implementing thorium in place of uranium in nuclear reactors. This is an interesting development because the byproduct of a thorium based reactor cannot be used to build a nuclear bomb (always a good thing), and the half life is a fraction of its uranium counterpart. This technology is fairly new, but if it works it could potentially solve a couple of the major concerns brought up by those opposed to nuclear power.

The thing to keep in mind here is that there is no perfect solution. We are going to be dependent on oil for some time yet, but the longer we take to address our oil problem, the worse off we are going to be. President Bush recently said “I think we better understand that there's not a lot of excess capacity in this world right now," According to Reuters. The demand for oil is increasing at a much faster pace than the supply, so according to economic theory the price of oil probably won’t be coming down anytime soon. If we don’t look for the best solution, one will be forced upon us eventually.

This problem is real in my mind, and as an investor I’m of course trying to figure out what the solution will be and how to profit from it. The best solution I see long term is with nuclear energy; what do you see? I’m curious to hear what others are thinking, so if you think you know what the solution to our oil problem will be, fill us in.


Anonymous said...

Why do you think we will never find an alternative? I don't know how far away we are, but I can see a day when solar power costs the equivalent of 5 cent/KWH retail and battery technology has advanced to where the electric car is viable. Some would call it science fiction, but I remain optimistic.

Eric Ames said...

Thanks for the comment...I don't think it is completely out of the question for us to find an alternative in the near future, I just don't think it is very likely. Maybe I'm being overly pessimistic, but with the knowledge I have of the options out there I don't see a near term solution.

Sure solar power has come a long way, and it probably will cost 5 cents/kw someday, but how far out is that going to be? Even if it does become cheaper to produce how much power will we even be able to create from it?

I don't know the answers to these questions, but again I just don't see solar power as the long term solution (uses rare materials, need places to put panels, doesn't work as well in certain areas, etc). It very well could be a piece of the solution, yet I don't feel like it will be "the solution" or even the largest part of it.

If someone else out there has intimate knowledge of the solar industry and the future advances to be expected I would love their input though as I am certainly not a solar power expert.

Me said...

India probably has the most advanced Thorium reactor programme. There's a pretty good read on the history and current progress over at

Anonymous said...

Everyone thinks about oil for energy, but what about all the other products/industries that relay on oil/petroleum based products.... the issues and opportunities are much more widespread than just energy...

Eric Ames said...

Great point Kevin, we do often put oil into the energy box when in reality it is used for many other things as well. Recently I've been hearing a lot about new oil free plastics. In particular there is a company I came across a company that makes their plastic bottles out of corn, and they are completely biodegradable. I thought that was a great idea, however, the use of corn for plastics will probably run into some of the same problems we found with Ethonal, but certainly a step in the right direction anyway.