Rays of hope
Just as the Stone Age didn't end because our ancestors used up all the stone, our current "Oil Age" is unlikely to finish because we have all run out of oil. However, perennial supply fears together with continuing tension in the Middle East continues...
Just as the Stone Age didn't end because our ancestors used up all the stone, our current "Oil Age" is unlikely to finish because we have all run out of oil. However, perennial supply fears together with continuing tension in the Middle East continues to keep oil prices high and extremely volatile.
The threats and opportunities offered by the coming dawn of the new "Eco Age" are numerous but as consumers we seem to be stuck in an "energy supply no-mans-land" similar to that tricky period in time when we were faced with the dilemma of sticking with our trusty video recorders or deciding to go for one of those newfangled DVD players!
While we energy consumers are paying through the nose these days for our power and petrol, a growing number are taking the leap of faith and opting for alternative energy sources in the hope that the sometimes high initial conversion costs can be recouped over the following few years by the savings made.
It could be argued that those gaining a greater understanding of the exciting energy sector will be best placed to profit from it, possibly progressing to the enviable position of being able to convert their own homes or cars to more cost-effective, renewable energy sources paid for out of their own investment profits!
Of course, one may choose to invest in new energy sources for purely moral reasons and - let's face it - saving the planet while making money is an ideal combination.
But environmentally-friendly energy technology is still very much in its infancy and although there have been some great strides forward in recent years, sadly we, the inhabitants of this planet, still show a great deal of apathy towards creating a better and healthier environment. So paradoxically this means the whole energy sector is in vogue at the moment, with investors looking to capitalise on both the fuel of the present and the fuel of the future.
Before we explore potentially profitable alternative power sources, maybe it is worth asking ourselves how much we actually know about oil. Investors regarded oil as a commodity. Basically, a commodity is something that is easily traded, that can be physically delivered and that can be stored for a reasonable period of time. Apart from oil, other examples include wheat, rice, iron ore, coffee, diamonds, silver and gold.
During times of rising inflation commodities tend to be a good investment as increases in the price of raw materials reflect the rising costs of goods. Realistically, most of us could not consider buying and storing such items so buying shares in certain companies or through specialist collective investments funds are certainly the most sensible way to invest in this sector.
Interestingly, crude oil, also known as petroleum, is the world's most actively-traded commodity with the biggest markets based in New York, London and Singapore.
Crude oil comes in different varieties depending on its specific gravity and sulphur content, which can change depending on where it came from. Here in Europe we tend to refer to the price of a barrel of Brent blend crude oil from the North Sea sold on London's International Petroleum Exchange (IPE). However, the Americans use the West Texas Intermediate (WTI) as its benchmark which generally refers to "light, sweet crude".
Confusingly the Organisation of Petroleum Exporting Countries (OPEC) uses its own reference price, known as the OPEC basket price. This is an average of seven crude oils made up from Saudi Arabia's Arab Light, the United Arab Emirate's Dubai crude, Nigeria's Bonny Light, Algeria's Saharan Blend, Indonesia's Minas, Venezuela's Tia Juana Light and Mexico's Isthmus. Although there are price differences between Brent, WTI and the OPEC basket, these are not large and price fluctuations tend to affect each equally.
The debate about oil prices and their continued effect on stock markets, fund performance and government policy will rage on for years to come but for even the average investor these insecurities offer threats and opportunities and therefore should be a factor when making any long-term investment decision.
Being blessed with sunshine in Malta, it is only natural that we first consider solar power when we think of renewable energy. Ironically, as the majority of our homes have not yet been converted to solar energy, we are maybe in a better position than most to not only consider the real benefits of this natural, non-polluting energy source but its negatives as well. These usually include the high initial costs which can take time to recoup and the off-putting "equipment aesthetics" - in other words, the units can look extremely ugly! It would appear these factors are now being addressed by the latest technology, which aims to greatly reduce costs while enhancing cell efficiency and the modification of their design so as to be much more building-integrated.
With increasing annual demand for solar energy, equipment technology is fast improving and successful companies within this sector are profiting. For example, I have been following First Solar Inc. since they first listed on the American Nasdaq Global Market index last year at $20 per share. Since then their share price has risen and now sits at around $220 giving the company a stock market value of over $17 billion.
While the Americans and Europeans are developing cutting edge solar-cell technology the Chinese are catching up fast. China's Suntech Power, which is listed on the New York Stock Exchange, has seen its profits rise and its share value steadily increase over the last year, now standing at around $53, and they are aiming to develop more powerful yet cost effective units in order to encourage more consumers to make the switch to solar.
Investors are also taking a greater interest in environmentally-friendly, renewable energy funds as these are also likely to continue to profit as solar energy companies can make up a significant proportion of such collective investment schemes.
Imagine for a moment the impact a simple change in the law would have whereby all new properties would be required to include solar or alternative power sources in their design. This, together with many other eco-friendly laws, are in fact now happening throughout the developed Western World, creating a shift in the mentality of those designing, building and living in such structures.
In investment terms, the energy sector is evolving and its very own "ecosystem", presently dependent mainly upon oil and gas producers, is changing and will in time grow to include more efficient, less destructive, less politically unstable and ultimately much cheaper suppliers of energy. Is your investment portfolio primed for a piece of the green action?
• Mr Lamb is director of FPC Investment Consultants. He may be contacted by e-mail on marklamb@fpc.com.mt or on 2131 8008
http://www.fpcmalta.com
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek independent financial advice before making any investment decision.
The threats and opportunities offered by the coming dawn of the new "Eco Age" are numerous but as consumers we seem to be stuck in an "energy supply no-mans-land" similar to that tricky period in time when we were faced with the dilemma of sticking with our trusty video recorders or deciding to go for one of those newfangled DVD players!
While we energy consumers are paying through the nose these days for our power and petrol, a growing number are taking the leap of faith and opting for alternative energy sources in the hope that the sometimes high initial conversion costs can be recouped over the following few years by the savings made.
It could be argued that those gaining a greater understanding of the exciting energy sector will be best placed to profit from it, possibly progressing to the enviable position of being able to convert their own homes or cars to more cost-effective, renewable energy sources paid for out of their own investment profits!
Of course, one may choose to invest in new energy sources for purely moral reasons and - let's face it - saving the planet while making money is an ideal combination.
But environmentally-friendly energy technology is still very much in its infancy and although there have been some great strides forward in recent years, sadly we, the inhabitants of this planet, still show a great deal of apathy towards creating a better and healthier environment. So paradoxically this means the whole energy sector is in vogue at the moment, with investors looking to capitalise on both the fuel of the present and the fuel of the future.
Before we explore potentially profitable alternative power sources, maybe it is worth asking ourselves how much we actually know about oil. Investors regarded oil as a commodity. Basically, a commodity is something that is easily traded, that can be physically delivered and that can be stored for a reasonable period of time. Apart from oil, other examples include wheat, rice, iron ore, coffee, diamonds, silver and gold.
During times of rising inflation commodities tend to be a good investment as increases in the price of raw materials reflect the rising costs of goods. Realistically, most of us could not consider buying and storing such items so buying shares in certain companies or through specialist collective investments funds are certainly the most sensible way to invest in this sector.
Interestingly, crude oil, also known as petroleum, is the world's most actively-traded commodity with the biggest markets based in New York, London and Singapore.
Crude oil comes in different varieties depending on its specific gravity and sulphur content, which can change depending on where it came from. Here in Europe we tend to refer to the price of a barrel of Brent blend crude oil from the North Sea sold on London's International Petroleum Exchange (IPE). However, the Americans use the West Texas Intermediate (WTI) as its benchmark which generally refers to "light, sweet crude".
Confusingly the Organisation of Petroleum Exporting Countries (OPEC) uses its own reference price, known as the OPEC basket price. This is an average of seven crude oils made up from Saudi Arabia's Arab Light, the United Arab Emirate's Dubai crude, Nigeria's Bonny Light, Algeria's Saharan Blend, Indonesia's Minas, Venezuela's Tia Juana Light and Mexico's Isthmus. Although there are price differences between Brent, WTI and the OPEC basket, these are not large and price fluctuations tend to affect each equally.
The debate about oil prices and their continued effect on stock markets, fund performance and government policy will rage on for years to come but for even the average investor these insecurities offer threats and opportunities and therefore should be a factor when making any long-term investment decision.
Being blessed with sunshine in Malta, it is only natural that we first consider solar power when we think of renewable energy. Ironically, as the majority of our homes have not yet been converted to solar energy, we are maybe in a better position than most to not only consider the real benefits of this natural, non-polluting energy source but its negatives as well. These usually include the high initial costs which can take time to recoup and the off-putting "equipment aesthetics" - in other words, the units can look extremely ugly! It would appear these factors are now being addressed by the latest technology, which aims to greatly reduce costs while enhancing cell efficiency and the modification of their design so as to be much more building-integrated.
With increasing annual demand for solar energy, equipment technology is fast improving and successful companies within this sector are profiting. For example, I have been following First Solar Inc. since they first listed on the American Nasdaq Global Market index last year at $20 per share. Since then their share price has risen and now sits at around $220 giving the company a stock market value of over $17 billion.
While the Americans and Europeans are developing cutting edge solar-cell technology the Chinese are catching up fast. China's Suntech Power, which is listed on the New York Stock Exchange, has seen its profits rise and its share value steadily increase over the last year, now standing at around $53, and they are aiming to develop more powerful yet cost effective units in order to encourage more consumers to make the switch to solar.
Investors are also taking a greater interest in environmentally-friendly, renewable energy funds as these are also likely to continue to profit as solar energy companies can make up a significant proportion of such collective investment schemes.
Imagine for a moment the impact a simple change in the law would have whereby all new properties would be required to include solar or alternative power sources in their design. This, together with many other eco-friendly laws, are in fact now happening throughout the developed Western World, creating a shift in the mentality of those designing, building and living in such structures.
In investment terms, the energy sector is evolving and its very own "ecosystem", presently dependent mainly upon oil and gas producers, is changing and will in time grow to include more efficient, less destructive, less politically unstable and ultimately much cheaper suppliers of energy. Is your investment portfolio primed for a piece of the green action?
• Mr Lamb is director of FPC Investment Consultants. He may be contacted by e-mail on marklamb@fpc.com.mt or on 2131 8008
http://www.fpcmalta.com
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek independent financial advice before making any investment decision.