CCM SECTOROPTICS
WITH MICHAEL SONI

Katrina, Oil, and Alternative Energy                                   

Monday, September 5, 2005 

Oil prices have been exhibiting one of the strongest up trends in recent history and now hover around $70 per barrel.  It was not long ago that the price of oil crossed the $40  mark, and at that point the  “experts” gave all sorts of reasons for why it was so high, ranging from terrorism premiums and other geopolitical concerns to seasonal issues. 

Now, you can be sure, Hurricane Katrina will be blamed for the most recent price spike.  True, Hurricane Katrina has proved to be one of the worst and most dangerous storms in U.S. history and it is also true that Katrina has contributed to higher prices by slamming into energy infrastructure, however, Katrina can only be held responsible for the last $5 increase. 

There are many theories circulating which attempt to explain the cause of these ever-increasing prices.  The only theory that seems to pass the gut check is that global oil production is peaking and we (the world) are entering a period of Oil Depletion.  If you bring up this concept of Oil Depletion with the “energy experts” most will vehemently argue that there is no basis for the theory, yet, Matthew Simmons of Simmons and Company International, the largest energy investment banking practice, and former member of Vice-President Cheney’s Energy Task Force; seems to be a believer in the theory. 

The underlying points for and against the theory of Oil Depletion are beyond the scope of this column and will be saved for a future column, but with a Goldman Sachs prediction of $100 oil, it is safe to say that as the price of oil continues to increase more emphasis will and must be placed on Alternative Energy. 

It is important to note that Alternative Energy options are available in varying degrees of development, and there will be much more work and money required before we can reasonably expect to replace fossil fuels with any of these sources. Below is a brief description of some major alternative energy sources.

Geothermal Heat

The only renewable energy source created naturally by the earth itself from the formation of the earth and radioactive decay. Well-designed geothermal systems are some of the most environmentally benign sources of energy. There is 50,000 times more energy in the upper six miles of the earth's crust than in all of the global oil and natural gas reserves combined.

Hydrogen/Fuel Cell

The lightest, as well as the most abundant element in the universe. To use hydrogen as a fuel, it must be extracted from another substance, such as water or natural gas. For this reason, hydrogen is considered an energy carrier as opposed to an energy source. In order to harness the energy in hydrogen, a fuel cell is required. A fuel cell is similar to a battery that never needs recharging as long as hydrogen is fed into the fuel cell.

Hydropower

Water is civilization's most precious natural resource- it is essential for the survival of life. Irrigation enables gardens to flourish in the desert, and, when harnessed for hydroelectricity, it can power civilization itself. A distant leader in global electricity production from renewable resources and an important contributor in the global energy mix. In the face of global challenges, emission-free, renewable, and domestically producible electricity is becoming increasingly sought after.

Nuclear Fusion

The process of joining the nuclei of two atoms together. Energy is equal to mass times the speed of light squared. It is easy to see that a small amount of mass can be converted into an enormous amount of energy.

Solar Energy

The sun provides a tremendously powerful source of renewable energy, which has the potential of supplying part or all of the energy needs of billions of people. From passive solar design to photovoltaic (PV) cells to solar cookers and water heaters, people of all backgrounds, budgets, and geographical locations have viable opportunities to reap the benefits of the sun’s powerful rays.

Wind Energy

Classified as a green power source, wind energy offers the benefits of providing a clean, renewable, and homegrown source of power. The incredible potential of wind power has not been overlooked by utility companies and energy experts, especially in light of its cost effectiveness.

Pure-play alternative energy firms include:

Distributed Energy Systems  (NASDAQ: DESC)
Hydrogenics Corp                (NASDAQ: HYGS)
Medis Technologies              (NASDAQ: MDTL)
Millenium Cell                      (NASDAQ: MCEL)
Plug Power                          (NASDAQ: PLUG)
Ballard Power Systems         (NASDAQ: BLDP)
FuelCell Energy                    (NASDAQ: FCEL)

GE (NYSE: GE) is also becoming increasingly involved in wind energy as this division is estimated to have revenue of close to $2 billion for 2005.

Michael Soni, is President & CEO of Cronus Capital Markets- a firm specializing in sector research, intelligence, and media. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. CCM transforms “Top-Down” research into intelligence by identifying sectors within the capital markets that, in addition to their inherent strengths, will benefit from participation in larger trends and cycles.

CCM enhances SectorOptics, by deconstructing and filtering the capital markets, in order to identify sectors experiencing a higher frequency of opportunities. By enhancing SectorOptics, CCM focuses the lens with which capital market sectors are viewed, resulting in greater clarity.

Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback – click here to send him an email.


Please see SecuritySolutionsWatch.com Terms of Use and Disclaimer.