Nuclear energy is the future again, says Andrew Gordon in Investor’s Daily Edge Unplugged. And uranium stocks are cheap right now. High gas prices are changing energy habits in the US. And nuclear offers a ‘clean’ solution…

It figures. Last week I argued in IDE’s Unplugged that Americans have been slow in making fundamental changes in their energy consumption habits. “In other words,” I said, “high oil prices haven’t really changed the way we live. We haven’t turned into Europeans – riding our bikes to work and/or squeezing ourselves into little Smart cars.”

GM is making me look like a liar. According to news reports last Thursday, GM is thinking about introducing the Chevrolet Beat to the U.S. market. The car had originally been planned to be sold in the Asia and Latin America markets only.  

It’s not quite as tidy as Daimler’s (DAI) Smart car, but it’s close. It’s about 138 inches long. The Smart car is 32 inches shorter. The Beat gets 40 mpg. The Smart car gets 36.

Will the Beat catch on? If gasoline prices keep rising, it will. It always comes down to price, doesn’t it?

High gas prices are making an impact. They’re doing exactly what they’re supposed to do. They’re changing the way we use energy – slowly, but maybe not quite as slowly as I’ve been thinking.

That’s the way the market is supposed to work. And yet the government still feels compelled to act. Of course, it’s an election year and the political parties would rather be seen as part of the solution – God bless them – than part of the problem.

Should they listen to the oil companies? They want rights to open up drilling off our continental shelf and in Alaska. More oil production from the U.S. means less oil dependency on others. How is that a bad thing, they ask.

Should they listen to the Fed? They think oil prices will drop in a slowing economy. It did in past recessions. Could we be looking at the tipping point of energy prices? Does it make sense for consumers to pile into Beat and other small cars with no effect on gas prices?

Should they look to the past? When we were whammed with soaring oil prices in the 1970’s, oil conservation and development of alternative energies was the policy of choice inside the Washington beltway.

By the way, it didn’t work. A sparkling new and naive Department of Energy tried to subsidize alternative energy development. But the program wasn’t ambitious enough nor did it have enough funding behind it. My take? The technologies were too rudimentary at the time to make a difference (especially when you compare them to todays).

But the other energy policy of the 1970s was working just fine. I’m talking about nuclear energy. Until the Three-Mile Island incident in 1979, nuclear power was the future. And it still can be (if one of our presidential candidates is elected).

But in any Republican (or Democratic) scenario, nuclear energy will have to share the energy stage.

Unlike the 1970’s, we now have pretty good alt-energy technology. We have the price incentives (high oil and gas). And people are generally more environmentally sensitive than 30 years ago.  

So perhaps the government should listen to the conventional view that the West can and should lead the world in adopting new energy-efficient consumption patterns. If it started here, the thinking goes, it would quickly travel east and south. And it would be instrumental in bringing oil prices down.

Of all the “conventional wisdom” scenarios, the above is the most seductive. And the most wrong-headed. Yes, most technology will come from the West. (But not all: Witness all those solar start-ups in China, for example.)

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I suspect developing countries will give the tree-hugging consumers of the West a run for their money as early adapters.

1. Developing countries can much less afford high-priced oil than the West.

2. Infrastructure, unlike in the West, has the opportunity to develop with energy-use concerns in the forefront. Commercial buildings, houses, and transportation infrastructure will be more energy-efficient from the get-go. For example, neighborhoods will be built closer to factory estates. There will be much less of the great suburban sprawl we have in the U.S.

3. You can’t miss what you never had. We have to relearn our energy habits. Some things – like leaving the porch light on at night – we’ll never stop doing. Developing countries start out with a cleaner slate. It won’t even feel like “adapting” to them.

4. The “alt-energy” they’re already gearing up to use extensively? Nuclear power. Solar, wind, thermal, wave power will all grow by leaps and bounds. But none of them comes close to the scale-up power of nuclear.

Nuclear energy is the future again.

And the best news? Junior uranium explorers haven’t been this cheap for a long time. Cameco (CCJ) is one of the larger uranium producers in the world and it’s traded on the New York Stock Exchange. It’s a fairly safe way to play this trend.

The juniors have higher risk and higher upside. My esteemed colleague, Rusty McDougal, though, has a couple in his portfolio where the upside dwarfs the risk. If I were investing for 2009 and beyond, they’d be some of the first companies I would look at.

Invest well,
Andrew Gordon

P.S.  To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

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Source: And the Beat Goes On