With oil touching $97 Tuesday, the clock is ticking for the U.S. to find a real alternative energy source. While Congress debates, the free market is doing their decision making for them.
Solar stocks like First Solar (FSLR) are surging on new contracts, utility giant Entergy (ETR) announced it will spin off its nuclear assets, and natural gas leader Chesapeake Energy (CHK) is jumping as investors see the fuel as a more viable, cleaner alternative than ethanol.
Aubrey McLendon, The CEO and co-founder of Chesapeake, told Fast Money that natural gas is “perfectly poised” to deliver what the country needs to alleviate its dependence on foreign oil. It’s clean, it’s affordable, it’s abundant and it’s American, McLendon said.
The lag between natural gas prices and crude oil prices is not surprising, he said, because there is actually an oversupply of natural gas right now. The disparity between the two commodities is so large – crude currently has a 12 to 1 relationship with natural gas on a BTU basis when it’s normally 6 to 1 – that natural gas simply makes sense as the most affordable and sensible alternative, McLendon said.
Natural gas has often been criticized as an unviable alternative because it is extremely difficult to transport. McLendon seemed to discount that theory, saying the U.S. has a great distribution network and, more importantly, the U.S. and Canada are both 96% self-sufficient in the production of natural gas. “The solution to most of our energy challenges right now lies right beneath our feet,” he said.
But natural gas isn’t the only practical alternative out there. Nuclear power, long fraught by political pressure, looks more feasible the higher oil prices soar, Karen Finerman said. It’s still a long way from reality but investors can get ahead of the action with a company like EnergySolutions (ES), scheduled to IPO next week. The company plans the logistics of building nuclear reactors.
Nuclear power can also be played through uranium – specifically, Cameco (CCJ), although Karen called the stock “too rich” and only worth buying through options.
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Trader disclosure: On Nov. 6, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Jeff Macke owns (YHOO), (INTC), (ATVI); Pete Najarian owns (CY), (BHP), (CSCO), is short (MBI), owns options in (BHI), (BIDU), (C), (FMCN), (GOOG), (HAL), (YHOO); Finerman’s firm owns Russell 2000 Puts, S&P 500 Puts, (CROX) options, (MSFT) options, (LEH) puts, is short (MER) and owns (MER) puts, (TSO), (TWX), (YHOO), is short (MDY), (IJR); Finerman’s firm and Finerman own (GS)