11/9/12 – More Good News on Energy

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Nov 9, 2012 12:10:23 PM

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One of my major reasons for cheer about the U.S. economy has been the evolving energy situation. Breakthroughs in oil and gas drilling have made U.S. prices for natural gas the world’s lowest and have started us on the road to again becoming the world’s largest producer of oil, as well as potentially making us energy independent.

Beyond that, though, we are developing other energy-producing technologies that are more sustainable and more diversified. I have debates with friends about the role these will play going forward, but, in my opinion, there’s no doubt that having the technologies developed makes us more secure. There’s nothing like having a backup plan.

The growth of one big area, generating energy from plant matter, has been hampered by feedstock availability. Ethanol from corn—essentially food into fuel—has been successful, but it faces limitations on the availability of the feedstock. As more corn is diverted into ethanol production, moral concerns have been raised about the effects of rising food prices on the poor. Plus, the process isn’t that efficient. What’s needed is a way to convert inedible plants, such as trees, and plant waste, such as cornhusks, into fuel.

On page B7 of today’s Wall Street Journal, “Throw a Log on the Refinery” lays out how close we are to commercialization of such technology. It may or may not be economically feasible at this point, but as with many other technologies I have highlighted here, the process continues. At some point, these energy sources will be both necessary and viable, and it is an excellent thing to have them this far along the development pipeline.

Upcoming Appearances

Tune in to Bloomberg Radio's Bloomberg Businessweek on Friday, February 28, at 3:45 P.M. ET to hear Brad talk about the market. Stream the show live at https://www.bloombergradio.com/, listen through SiriusXM 119, or download Bloomberg's app, Bloomberg Radio+.

Tune into Yahoo Finance's The Final Round on Thursday, March 12, between 2:50 and 4:00 P.M. ET to hear Brad talk about the market. Exact interview time will be updated once confirmed. Watch at finance.yahoo.com

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