Oil Prices and the Nuclear Renaissance
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By Melissa Pistilli-Exclusive to Uranium Investing News
According to a recent study by the Korean-based POSCO Research Institute, the nuclear power industry stands to benefit immensely from rising global energy demands and the push towards climate change legislation.
Many nations around the world are already either increasing their existing nuclear energy production or building their first reactors. In the United States, where over 60 per cent of energy production comes from fossil fuels, nuclear power is getting much more support than it has in the last thirty years since the devastating accident at Three Mile Island.
The US is one of the world’s largest energy consumers and with the Obama Administration pushing for “a new era of energy exploration” opportunities abound for fossil fuel alternatives.
While for many of us the words “alternative energy sources” bring to mind images of solar, wind or bio fuels, these technologies are far from possessing the capacity to provide energy on the enormous scale needed in an energy hungry nation like the US.
That’s why there has been an increasing call for more attention to nuclear power by those in government and the energy industry.
Oil Price and Nuclear Correlation
When the price of oil was threatening $150 a barrel in the summer of 2008, alternative energy sources like nuclear energy began to glow brighter as a solution to the problems of high fossil fuel costs and global warming.
But as oil prices began to slip, falling as low as $32 a barrel in December 2008 and hovering around $50 for most of 2009, the push towards nuclear, or any alternative fuel, seemed to die down.
Of course there is a great correlation between oil prices and the level of demand for nuclear power as a replacement for fossil fuels. As long as oil remains relatively inexpensive compared with the alternatives in the short term, nuclear power plans around the world will be put on hold.
But, there are several indications (and common sense) that tell us oil will not remain below $100 a barrel for long and will be quickly re-testing its 2008 high. In fact, some believe we may see oil double that high within the near future.
Kevin Kerr, Market Watch global commodities advisor, believes the price of oil per barrel could reach $300 in the next year to three years. Kerr has said the global recession and its dampening affect on energy demand is a temporary setback to the still strong fundamentals that boosted oil to nearly $150 eighteen months ago.
The strong global demand for oil that we’ve seen in the past few years will return especially in emerging Asian economies like China and India.
And as oil prices skyrocket again, alternatives like nuclear power will regain their prominence in the world energy stage.
Nuclear Power in the US
For now, the US acquires around 8 per cent of its energy production from nuclear power; but that could change in the next few years.
The US is home to 104 active nuclear reactors and the push toward fossil fuel alternatives to meet rising energy demands, which the US Energy Information Agency forecasts will increase 26 per cent from 2007 to 2030, has 34 more slated for construction. Around 70 per cent of US states require that a portion of their electric power be generated by renewable energy sources and a similar federal mandate has been proposed.
While nuclear power faces much criticism from environmental groups, there are those who argue that nuclear energy is actually one of the safest, sustainable, clean and reliable forms of alternative energy production that is also years ahead of other “renewable” energy sources.
This is pretty much the argument put forth by the National Center for Policy Analysis (NCPA). In a recent article, NCPA senior fellow H Sterling Burnett and legislative assistant James Franko call on policymakers to consider nuclear power “as a long-term solution to America’s energy demands.”
“Nuclear power is a safe and reliable source of energy,” write Burnett and Franko. “The technology exists today for nuclear power to safely provide America’s energy needs. Policymakers should remove barriers that prevent nuclear energy from being fully utilized.”
Obama Administration Backs Nuclear Power
In 2005, Congress gave the okay for $18.5 billion in loan guarantees for the nuclear industry and the Obama Administration has signaled it is keen to distribute the guarantees.
The first loan guarantee given out by the Department of Energy (DOE) will likely go to Southern Energy who hopes to build two new plants in Georgia. Other companies making the DOE’s short list include Constellation Energy, NRG Energy and SCANA Corp.
“When DOE issues their first loan guarantee, that’s going to send an important signal to private-sector financing, and Wall Street in particular,” said Nuclear Energy Institute spokesperson John Keeley.
Tags: alternative energy, clean energy, climate change, nuclear, nuclear energy, nuclear industry, nuclear power, oil prices, price of oil, Renewable Energy, Uranium
January 6th, 2010 at 2:00 pm
I have always been intrigued by the “connection” between oil prices and uranium prices, particularly because there should be absolutely no connection. Uranium is used exclusively for electricity generation; oil is used, if I’m not mistaken, something over 90% for transportation. Very little petroleum is used to generate electricity, so why do people equate high oil prices with higher electricity generation costs? Yet when crude prices drop, so too do the stock prices for nearly every uranium production company. There shouldn’t be any relationship or correlation, and yet in the mind of the market, there is.