4 Companies With Tomorrow's Fuel

The buzz about alternative fuels and natural gas vehicles died down when oil went from $140 a barrel in 2008 to less than $40 a barrel in 2009. But with gas prices rising, and no end in sight to political turmoil in the Middle East, it may be time to take a look at how we could invest in alternative fuels. Here are four stocks that have caught my eye.

Clean Energy Fuels (Nasdaq: CLNE  )
The transition to alternative fuels would be difficult without some infrastructure in place. That's where Clean Energy Fuels comes in, providing a growing network of natural gas fueling stations. Flying J has recently partnered with the company to begin providing a nationwide footprint of fueling stations for natural gas-powered trucks, and I expect more partnerships in 2011.

Fuel Systems Solutions (Nasdaq: FSYS  )
Fueling stations would sit empty if not for the kind of technology Fuel Systems Solutions provides. It can turn gasoline-burning devices into natural gas-powered machines, serving a broad array of applications in the transportation, industrial and power-generation markets.

Rentech (AMEX: RTK  )
The "Rentech Process" turns municipal waste, biomass, coal, and just about anything else into useful products like chemicals and fuel. Right now, the company is small, but it has proposed  projects in California and Mississippi, and its technology is very scalable. In a test case, someone had the wonderful job of driving a Rentech Diesel-powered Audi A3 on a 1,000-mile trip last October.

But Rentech isn't the only one making synthetic fuel from abundant sources of energy. Syntroleum (Nasdaq: SYNM  ) is also creating fuels from natural gas, fats, oils and greases. More than 400,000 gallons of the company's Syntroleum have been tested as synthetic diesel and jet fuel. Neither company is consistently profitable, but both hope to turn around  their finances as projects get built.

FuelCell Energy (Nasdaq: FCEL  )
Last but not least, FuelCell Energy takes the natural gas or methane other companies produce and turns it into efficient electricity. Fuel cells can provide on-site power generation for hospitals, colleges and commercial buildings, lowering their reliance on the grid. In places that need energy to operate, natural gas fuel cells can be an attractive power source.

These companies all offer ways to invest in alternative fuels as oil prices rise. But be sure to do your due diligence when looking at these stocks. Profits can be elusive in this sector, and big oil companies are waiting to pounce the moment alternative fuels prove profitable.

Interested in reading more about one of these stocks? The best way is to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

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.

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Read/Post Comments (5) | Recommend This Article (16)

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  • Report this Comment On March 07, 2011, at 3:15 PM, jimmy222222222 wrote:

    so..........CLNE is about to turn up the profits on thursdays earnings????

  • Report this Comment On March 07, 2011, at 3:28 PM, jimmy4040 wrote:

    Here's an alternate view (though I like FCEL). The US has, estimates vary widely, anywhere from an 800 billion barrel to 1.5 trillion barrel equivalent of oil locked up in shale in the Midwest. Most of the ground is currently owned by the government.

    Now it's expensive and environmentally degrading to turn shale into oil the traditional method called hydrogenation. The current price of oil solves one half of that equation making the cost viable. There's a new process being attempted called "situ mining" which may help with the other half , comparatively speaking.

    Now I don't have a crystal ball, but I think there's a pretty decent likelihood of a GOP Senate in 2012. Given the environmental proclivites of a GOP Congress, I think the door will be wide open to a vast opening of these shale oil deposits to exploitation.

    The thing it has going for it is the market for the oil already exists, as opposed to trying to create one for nat gas vehicles.

    So given that Fool investors are long term, I am betting that one of the major companies interested (Shell, Exxon, or Chevron, along with some smaller partners) are by 2016 reaping much more of a bonanza from the Colorado area than the alternative fuel companies.

    It's a heckuva bet, either way.

  • Report this Comment On March 07, 2011, at 4:00 PM, kyoufu wrote:

    While it's true SYNM isn't consistently profitable yet, their project is already built. They, partnered with Tyson Foods, finished the first plant in Sept. 2010. It has yet to have opening ceremonies, and is currently working towards reaching full capacity (75 million gallons/year).

  • Report this Comment On March 07, 2011, at 10:41 PM, pstoimenov wrote:

    In my humble opinion none of these companies stands a chance to make money. Anybody interested in alternative fuels should brush up their chemistry and study what these companies do.

    The only way any of these companies can make profit is either through significant subsidies (not sustainable) or through a magical technological breakthrough (not likely).

    There is a good reason why Exxon, Shell, etc do not buy these companies. They are just as interested in alternative energy, but they know very well that their promises ('technology') is a scam.

    Yes they can make fuel, but nobody would buy it unless the oil price exceeds 200 $/barrel.

  • Report this Comment On March 08, 2011, at 2:52 AM, KurtEng wrote:

    'FuelCell Energy takes the natural gas or methane these other companies produce and turns it into efficient electricity.'

    I don't think that has actually been proven in a practical application. Secondly, making electricity from natural gas is absolutely nothing new. It's called a gas turbine and many utilities use it to make electricity at higher efficiency and lower cost than a fuel cell. Fuel cells are a fascinating technology, but I don't see them as a breakthrough in energy.

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