With oil prices shooting up, you would think the time would be ripe for investing in alternative energy companies. Not necessarily, says this article from the Associated Press.
With oil prices soaring, investors may be wondering what options there are among renewable energy stocks. The answer is, not many. Fuel cell companies are floundering, solar startups are far from solid bets and only a handful of companies are turning a profit in wind power.
For small investors who think climbing oil prices are bound to spark greater interest in other sources of power eventually, some of the most interesting plays could be among traditional companies that are exploring alternative energies - General Electric Co., FPL Group Inc. and BP PLC.
Unfortunately, there still isn't all that much money being put into developing alternative energy.
"Unfortunately and tragically there are simply not a lot of alternative energy sources being developed," said Stephen Leeb, president of Leeb Capital Management and co-author of "The Oil Factor," which suggests crude prices will likely strike $100 a barrel by the end of the decade, if not sooner.
"It's sad, but that's the reason oil is at nearly $50 per barrel," Leeb said. "If there were a whole universe of alternative energy companies making lots of money, you probably wouldn't have an energy crisis today."
With so much money yet to be made in oil, there hasn't been a great deal of investor interest in renewable sources of power, analysts say.
The article also has an interesting tidbit about the break-even point of wind power as it relates to the price of oil.
"At $10 per barrel for oil, it makes no sense to use wind. But at $50 per barrel, wind makes a lot of sense," Patsky said. "Wind broke to a point of being economical in most parts of this country vis-a-vis the cost of electricity back when oil passed $30 per barrel, and now it's incredibly economical. I don't think there's very many places in the country where there's a cheaper way to produce energy than wind."
Among traditional energy companies, it sounds like BP is the one that is actually putting the most into actually developing alternative energy sources.
Among the major energy companies, BP has done the most to develop alternative fuels, investing in solar and wind power as well as financing research into applications for hydrogen. Though many remain skeptical that the world's largest integrated oil concern is really looking "beyond petroleum," the steps it's taken so far have led some socially conscious investors to deem it best in its class.
"BP is legit, it's for real, and it's spending a lot of money ... trying to broaden its reach to be a full-service energy company meeting the needs of the future," Patsky [portfolio manager of the Winslow Green Growth fund] said. "We'd certainly rather see people invest in BP than Exxon Mobil Corp., where management still denies that global warming is happening. BP has made statements that they want to do whatever they can to reduce the contributions that fossil fuels make to global warming ... and that's a big statement for a company to make, to admit its product is part of the problem."
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Posted by: Bob | February 04, 2009 at 05:36 PM