A funny thing happened on the way to a new world powered by anything, but fossil fuels; the oil market collapsed as demand for crude dropped with gasoline above $4 per gallon. Will the decline in crude end the desire to move the country away from oil?
Time will tell, but thankfully the topic of alternative energy remains top of mind. With an election, it is all but certain to keep the issue front and center. In addition, some very big players, other than Nobel Laureate winner Al Gore, are chiming in with alternative energy plans.
The biggest of those names is oil tycoon, T. Boone Pickens. The guy that made millions in the oil and gas exploration business is now a big proponent of finding a solution that does not involve burning carbon.
So far, he seems to be on to something. His website, www.pickensplan.com, has seen millions of hits and is generating a ton of publicity. The interest does not appear to be waning with the fall in oil prices that we have seen since the peak in early July.
That’s a good thing. We need to keep the momentum going as solving the oil issue will result in many ancillary benefits including foreign policy gains and reduced carbon burning.
The crux of the Pickens Plan is to tap into energy sources including wind and natural gas. According to one study, there is enough wind energy to power world energy needs 7 times over. In the U.S., Pickens claims that a $1 trillion expenditure would build turbines from Texas to North Dakota.
In the mind of Pickens, that is a low price to pay given the $700 billion spent every year on foreign oil.
As for natural gas, it is more plentiful, and the auto industry has developed a natural gas burning engine that is cheaper and cleaner burning. The biggest draw is that natural gas is a domestic resource. Using more of it would significantly reduce our need for foreign oil.
Who Are the Winners in the Pickens Plan?
The natural gas companies look to be the biggest winners in this plan. Given that the technology is already available, moving to natural gas would greatly increase the demand from those that own and produce natural gas.
I’m thinking Chesapeake Energy (CHK), Spectra Energy (SE) or Encana (ECA). In addition to these, those that build pipelines and LNG facilities should perform well under the Pickens Plan. One name there would be Chicago Bridge and Iron (CBI). (See also: "Chesapeake Energy: Wait for the Oil Bubble to Burst.")
In the wind space, I think General Electric (GE). One trillion dollars in potential orders for its turbines will look good to any company especially one struggling with a credit crisis like GE. (See also: "General Electric Battens Down the Hatches.")
Last year as oil prices went through the roof, investors poured their money into solar plays. Stocks like LDK Solar (LDK), Trina Solar (TSL) and Solar Fun (SOLF) all sky rocketed in 2007. Some of the names quadrupled in value as investors raced for everything solar.
That bubble burst in 2008 as the realization that these stocks had gone too far too fast set in, and gains were quickly given back in the first quarter. Record oil prices during the second quarter returned the enthusiasm to the group.
Unfortunately, those gains were short lived as oil prices fell back to the $100 range. The roller coaster ride has been incredible with many of these names now trading at levels seen in late 2007.
Investors are betting that lower oil prices reduce the urgency of change. We don’t need alternative energy if oil is cheap and plentiful. As a result, solar adoption may take longer than previously expected.
That’s a mistake by investors in my opinion. Given that both Presidential candidates are actively pushing for alternative energy, including solar, I would expect adoption of solar to happen quicker irrespective of oil prices. (See also: "Let the Sun Shine in on Solar Stocks.")
That’s a good thing. Another positive came recently with an announcement from Google (GOOG). The large engine is proposing its own $4 trillion alternative energy plan.
Similar to Pickens, GOOG wants to get the U.S. off its addiction to oil. Its goal is to do so by 2030. Admittedly, GOOG says doing so will require an investment of trillions of dollars, but such cost will be worth it in the long run.
GOOG, through its non-profit google.org, has invested $45 in alternative energy businesses. These investments include wind, solar and geothermal technologies. Although these investments are risky in nature, the rewards could be quite large.
Hopefully, lower oil prices fail to diminish interest in alternative energy. We can all benefit from the development of this important sector. If we can make money doing so, all the better.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com and check out:
