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Oil is on everyone's mind these days. Whether you're predicting $220 a barrel like Nomura Holding, or ignoring calls for an oil super-spike like fellow Fool Morgan Housel, it's time to put a little thought into how you're investing in energy.
Oil is already over $100 a barrel, and with a number of oil-producing countries on the verge of complete meltdown, now is the time to start thinking about alternatives to oil. If you're not ready to drink the solar/wind Kool-Aid, there are a few ways you can invest in fuel sources that wouldn't require a paradigm shift in power generation -- and one I would avoid at all cost.
Leveraging domestic natural gas
Clean Energy Fuels (Nasdaq: CLNE ) is building a nationwide network of natural gas fueling stations. Atlantic City and Los Angeles have recently committed to bus-fueling stations as the company's list of customers grows. In Las Vegas, UPS (NYSE: UPS ) recently contracted with the company to fuel 48 liquefied natural gas trucks.
Capstone Turbine (Nasdaq: CPST ) is another way to play energy fears as operations like datacenters, hospitals, and office buildings look for secure ways to power operations. The company's turbines can run on natural gas, propane, and a variety of biogases. A hybrid electric transit bus or car can even run on one of the smaller turbines.
Betting on power storage
Electric vehicles have been a front-page topic with a relatively small customer base to this point. If gas hits $5 a gallon, a Nissan Leaf or Tesla Motors (Nasdaq: TSLA ) Roadster may look a little more attractive to buyers.
I'm not calling for full-fledged adoption of electric vehicles, but even a modest boost in demand could help battery makers soak up extra supply. Both A123 Systems (Nasdaq: AONE ) and Ener1 (Nasdaq: HEV ) have struggled with losses and a slow ramp of EV production. If oil prices stay high, you can bet electric vehicles will become an even hotter topic.
Running from ethanol
Ethanol is one fuel I would avoid despite higher oil and gas prices. Corn prices have risen even faster than oil, and companies like Pacific Ethanol (Nasdaq: PEIX ) aren't even close to making a profit. In the past year, Pacific Ethanol has lost $0.52 per share, almost as much as its $0.72 stock price today.
I would love to say that ethanol could be a big part of our energy future, but if production increases, so do corn prices and profits go out the window. It just doesn't make any sense.
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