Betting On Commodities  

Posted by Big Gav

Canada's Globe and Mail reports on the boom in commodities (particularly energy commodities) (which wouldn't be all that obvious from today's stockmarket performance).

With the benchmark Commodities Research Bureau index zooming to a 24-year high, some are warning of a bubble that could soon burst. But others say the party is just getting started.

"I believe that investing in commodities will represent an enormous opportunity for the next decade or so," says Jim Rogers, a U.S. fund manager and author of the book Hot Commodities.

For investors who think they've missed the train, there's reason to believe the ride may be far from over. Mr. Rogers, co-founder of the Quantum Fund with George Soros, points out that the last big commodities cycle lasted a full 14 years, from 1968 to 1982.

No commodity is drawing more attention than crude, which set jaws dropping again this week as it briefly pushed through $57 a barrel. But even as oil hits new highs, investors such as Mr. Sprott are betting on where the big money will go next.

While he remains a huge fan of oil, he's also gambling on coal and uranium, which have already risen sharply in price and could go higher as the world exhausts its finite supply of crude. Plenty of investors appear to share that view.

Reinforcing this view are recent comments by the head of the IAEA. His comment that nuclear power (from mining to waste "disposal", whatever that means) has about the same carbon emmissions as wind or solar power is interesting - I'd like to see a calculation of the total EROEI for nuclear power - some peak oil people claim it's low, but I've never been very convinced by the reasoning used.
Expectations of a sharp rise in energy demand and the risk of climate change are pushing many countries to return to the idea of nuclear power, the head of the United Nations nuclear watchdog said on Monday.

Even the most conservative estimates predict at least a doubling of energy usage by mid-century, Mohamed ElBaradei, director general of the International Atomic Energy Agency (IAEA), told a conference on nuclear energy in the 21st century.

"All indicators show that an increased level of emphasis on subjects such as fast growing energy demands, security of energy supply, and the risk of climate change are driving a reconsideration, in some quarters, of the need for greater investment in nuclear power," ElBaradei said.

"The IAEA's low projection, based on the most conservative assumptions, predicts 427 gigawatts of global nuclear energy capacity in 2020, the equivalent of 127 more 1,000 megawatt nuclear plants than previous projections," he said.

ElBaradei pointed to nuclear energy policy plans in China, Finland, the United States and possibly Poland as proof that nuclear power may be returning to vogue.

"Nuclear power emits virtually no greenhouse gases. The complete nuclear power chain, from uranium mining to waste disposal, and including reactor and facility construction, emits only 2-6 grams of carbon per kilowatt hour," he said.

"This is about the same as wind and solar power and one to two orders below coal, oil and even natural gas."

As a result we're seeing a mania for uranium stocks on the ASX. This started with the bigger producers (ERA, WMR and RIO) and has now spread to the very speculative end of the market (PDN, RFT and DYL).

Energy Bulletin also has a good article today on the current debate about when the peak will occur.

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