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The green energy bandwagon continues to roll ever onwards – now the International Energy Agency has jumped on board.
The group reckons that the world needs to spend more than £10 trillion (that’s £10,000bn, or roughly eight times the size of UK consumers’ debt burden), on alternative energy over the next ten years to cut greenhouse gas emissions.
Now, as we’ve said before, we’re not really qualified to talk about the ins and outs of global warming – debate is still raging over just how alarmist the Stern report was, for example. But the reality of global warming is neither here nor there – the point is that most people believe it’s happening.
And that spells opportunity for investors…
The International Energy Agency estimates in its World Energy Outlook report that global energy demand will rise by 53% by 2030, with most of the rise coming from developing countries such as China and India, says The Telegraph. These countries will also account for more than three quarters of the rise in emissions of carbon dioxide (CO2) – the key greenhouse gas – which are expected to go up by 55% over the same period.
But the IEA also has an ‘Alternative Policy Scenario’, whereby greater use of biofuels, nuclear power, and more fuel-efficient transport – among other things – could see global energy demand actually fall by 10% during the same period, which would apparently also reduce CO2 emissions by 16% across the world.
Regardless of your stance on global warming, the goal of cutting our reliance on fossil fuels is not a bad idea. Despite the current focus on CO2 emissions, it’s important to remember that this isn’t all about green politics. As the IEA points out, continued use of fossil fuels will get more expensive, and also make the world even more dependent on some of its most unstable regions.
And although the price of oil has remained historically high (despite the drop-off since May), the IEA also says that investment by oil and gas producers to meet higher demand has been “disappointing”. Adjusting for inflation in the cost of exploration (which of course, has been driven up by demand for rigs, engineers, and all the other things you need to find oil and gas), investment only went up by 5% in 2005.
So it seems fair to say that regardless of all the talk of new sources coming on stream, and high prices driving companies to find extra supplies, the bull market in oil is by no means over yet. That means the drive to find new ways of getting oil is by no means over – you can read more about this in a recent MoneyWeek cover story, by clicking here: The future of oil – and how to profit from it.
But the trouble with finding new ways to get oil is that many of them are pretty damaging to the environment. Getting oil from Canada’s oil sands, for example, uses up vast quantities of water (which in itself is in short supply) and a great deal of natural gas.
So genuine alternatives to oil are also required. And the green lobby has now pretty much embraced what was once its ultimate bogey man – nuclear power.
As we’ve pointed out before, the drive to build more nuclear power plants has sent the price of uranium soaring. And one recent mining disaster has sent the price even higher (see: Are we facing Peak Uranium?. But it seems likely that there’s still plenty of scope for uranium to become even more costly, especially as demand for more reactors becomes more entrenched.
Another area – though a lot more speculative – that could do well is carbon trading. For more on this, see Merryn Somerset Webb’s recent MoneyWeek cover story, available to subscribers, at: How to profit from carbon trading. And if you’re not yet a subscriber, you can get access to all the content on the MoneyWeek website and sign up for a three-week free trial of the magazine, just by clicking here: Sign up for a three-week free trial of MoneyWeek.
Turning to the stock markets…
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Marks & Spencers put in a phenomenal performance yesterday, its share price soaring over 6% following its strongest results in a decade. The retailer led the FTSE 100 19 points higher to a close of 6,244. However, it was a bad day for Yell which fell nearly 7% following weaker-than expected first-half results. For a full market report, see: London market close
Across the Channel, both French and German shares closed at five-year highs. The Paris CAC-40 was 35 points higher, at 5,437, and the Frankfurt DAX-30 was 31 points higher, at 6,361.
On Wall Street, stocks closed higher as investors awaited the results of the mid-term elections. The Dow Jones closed 51 points firmer, at 12,156. The S&P 500 ended the day at 1,382, a three-point gain. And the Nasdaq closed 9 points higher, at 2,375.
In Asia, the Nikkei closed 177 points lower, at 16,215.
Crude oil was trading at $58.95 a barrel this morning, whilst Brent spot was at $56.26 in London.
Spot gold last traded at $625.40.
And in London, telecoms company Cable & Wireless posted better-than-expected first-half results today. The company is in the middle of a radical restructuring following a spate of profit warnings, including cutting jobs and switching its focus to overseas customers. Shares in Cable & Wireless had risen by as much as 5.5p this morning.
And our two recommended articles for today…
Are we heading for a winter of stockmarket discontent?
– The stock market usually goes through a number of different cycles each year – and right now, it’s entering what is historically the strongest six months for stocks. Except that this year things have unfolded a little differently on Wall Street. To find out whether the outlook is bullish or bearish – and how the mid-terms could affect the markets – read: Are we heading for a winter of stockmarket discontent?
China or India: whose economic growth will prove more durable?
– Western consumers are used to buying clothes made in China or being diverted to a call centre in India. These emerging markets have benefited from globalisation by supplying goods and services far more cheaply than Western workers. But which economy is best placed to weather an economic slowdown? Charles Sizemore of the Daily Reckoning looks at why India’s growth is uniquely resilient among the emerging markets of Asia in China or India: whose economic growth will prove more durable?