May 3rd, 2008

Is the course of alternative energy stocks influenced by the price of crude oil?

Micron asked:


Hi all,

got interested in stock of companies dealing with alternative energy sources. Such would be: wind, water, solar, ethanol, fuel cells etc.

I think the USA is starting to understand that oil will not last forever and that by using it we actually harm our world. I believe that this leads to a rethinking process that will rather soon start pushing the idea of alternative energy sources. Will stocks of such companies suffer every time prices of crude oil falls? Or is the idea of owning such stocks might get more stable?

Thanks
Micron

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This entry was posted on Saturday, May 3rd, 2008 at 3:48 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

5 Responses to “Is the course of alternative energy stocks influenced by the price of crude oil?”

  1. PAYDAY Says:
    May 5th, 2008 at 6:42 am

    Energy is a sector and oil is the big gorilla of that sector. The sector wil follow the proce of crude until an alternative enrgy becomes profitable beyond just a feel good green investment.

  2. muncie birder Says:
    May 8th, 2008 at 6:11 pm

    This is a very difficult question to answer. I do have one thought. There is no way ethonol is economical, at least as manufactured in the U S. It requires more energy to make the stuff than than it provides. It is a Bush scheme to make the public believe we are doing something. Of course the government provides a subsidy at taxpayers expense. Good for the farmers however. Might buy fertilizer stocks or Deer.

    I did buy stock in a wind turbine company. Hopefully it was a good idea. Only time will tell. VWSYF

  3. NC Says:
    May 10th, 2008 at 12:11 am

    People tried that in 1980s and were largely disappointed; oil proved to be a more lasting resource than many thought, while the alternatives were not as warm and fuzzy as it first appeared. Ethanol, in particular, if it were to replace a large percentage of oil, would require a manyfold increase in acreage of corn and sugar cane, which in turn would put quite a bit of pressure on the water resources.

    Also, it is far from certain at this point which of the alternative fuels (ethanol, gasoline from coal, gasoline from natural gas, tar sands, oil shales, biodiesel), if any, will be more profitable in the long run. So far, biodiesel is a clear laggard, but people bet on it anyway hoping that better engineering would eventually bring the cost down…

    All in all, alternative energy should be thought of as speculative investment.

  4. Frank Castle Says:
    May 12th, 2008 at 12:48 pm

    Yes.

    If Oil costs $100.00 USD and Ethanol costs $50.00 then Ethanol Stocks will rise.

    If the Oil costs $25.00 and Ethanol costs $26.00 then Ethanol Stocks will drop.

  5. Jelly Roll Capital CFA Says:
    May 12th, 2008 at 5:19 pm

    To answer your question: yes, the price of oil influences alternative sources. Thats Economics 101, substitution.

    To tell you what to do about alternative energy, I can only say that I agree with Muncie that ethanol is not the answer to America’s energy problem. I believe synfuels (made primarily from coal) will be a large part of the answer. If you are familiar with Sasol (ticker: SSL) in South Africa, you’ll know what I’m talking about. I think Sasol is a good alternative energy play, but the better one is Headwaters (ticker: HW). If you want to read about Headwaters, there is a free research report at (ad supported, PDF format) for you to read.
    If you have any questions, feel free to email me at
    Hope this helps.