6 Stocks to Combat Rising Oil Prices

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.

Interested in following or reading more about these stocks? Look below to add each to your watchlist, which aggregates all of our Foolish analysis on a particular stock as well as tracks its performance.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Fool owns shares of United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (10)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 24, 2011, at 6:23 PM, ChuckWoolery wrote:

    I can't fathom paying more at the pump. If it really reached $5/gallon, I may have to buy a car that uses less gas. Hopefully this is a short-term effect of the problems in the Middle East but only time will tell.

  • Report this Comment On February 24, 2011, at 8:01 PM, midnightmoney wrote:

    Sell your car, get a bike, change your life. I mean actually change it. Go electric. Walk. Take public transport. Can't do any of those? Move to a place where you can. Or pay up for gas and deal with it. But it's not as if you won't have had time to prepare for the inevitable spike when it actually comes.

  • Report this Comment On February 25, 2011, at 3:17 AM, waytosanjose wrote:

    Ethanol works. The rest of the world knows this. The difference is sugar, not corn. Far more efficient. Take a look at CZZ.

  • Report this Comment On February 25, 2011, at 12:46 PM, jimmy4040 wrote:

    Any of these would be idiotic choices, totally dependent on government largesse.

    If you want to combat rising oil prices in your own portfolio, buy oil related investments! It's not that hard. My personal picks would be those companies like Suncor, who deal in tar sands or shale oil, but also buy brent crude futures (not now, but on the dips) .

    Virtually all of these choices would receive a death sentence (except the boondoggle of ethanol, which has bipartisan support) if the GOP takes over the Senate in 2012. So if you're a long term investor, as most Fools are, these stocks are a serious gamble.

  • Report this Comment On February 26, 2011, at 5:40 PM, DDHv wrote:

    No telling when or if it goes public, but anyone interested in a good technology should check out:

    http://www.jpods.com/

    Personal Rapid Transit could have a large effect in urban or semi-urban areas. Check out Morgantown, which has been using it since the 70s.

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