Jeff  Carter
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At the Chicago Booth Graduate School of Business Management Conference Friday, I listened to a panel discussion on energy. It was interesting, primarily because the two panelists didn’t mince words.

They offered up some interesting stats. Did you know that Chevron ($CHV) spends $33 billion a year just to keep the doors open and the lights on. Amazing operating budget. For that 33 billion spend, they control 2% of the world wide oil market.

Conclusion: Running an oil company isn’t cheap and has a lot of fixed costs.

Question: Why do we demonize, regulate and tax the crap out of them?

Another data point they offered was that in the next ten years, the world will need 40% more energy to operate. Demand is going up. The reason? In America, when we go through our daily lives, we implicitly trust that lights will go on, air conditioning and heating will work. We know if we plug something in, the electricity will power it. We use cell networks. We don’t walk and bike everywhere, and generally get to place to place using some form of powered transportation.

Well guess what. The rising middle class in the rest of the world wants the same thing. As China, India, Brazil and other countries increase their standards of living, they will demand more energy.

There is the concept of “energy density” to consider. For example, solar power is 10-15 times less dense than wood.

MaterialEnergyDensity(MJ/1kg)
Solar*- 0.2-1
Wood- 10
Ethanol- 26.8
Coal- 32.5
Crude Oil- 41.9
Diesel- 45.8
Natural Gas- 55.6
Natural Uranium- 570000
Reactor-grade Uranium- 3700000

Conclusion: Energy prices aren’t going lower in the long run and instead of battery powered cars and trucks we should figure out how to make uranium powered cars and trucks.

Question: Why aren’t we exploring like crazy for new sources of energy? Why aren’t we building nuclear power plants? Why aren’t we utilizing things like coal to be a bridge to get us to future energy sources?

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Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.