It's Friday, and alternative energy stocks are red hot (for some reason). At 12:15 p.m. EDT, shares of electricity-in-a-box fuel cell company Bloom Energy (BE -6.56%) are up 5.7% (after scoring 9% gains this morning). Enphase Energy (ENPH -1.46%), which makes microinverters for the solar power industry and was up nearly as much as Bloom earlier today, is now up 4.1%. Best of all is solar power system producer SunPower (SPWR -1.95%), still holding onto a 6.5% gain after topping 11% earlier in the day.
Why are these stocks soaring? In the case of Enphase, it's most logical to assume the stock is still coasting on the bullish news of four separate analysts lining up to endorse the stock yesterday, after Enphase was rocked by a negative short report Wednesday. As regards Bloom and SunPower, however, the rise of these stocks today is something of a mystery.
Or maybe not so much of a mystery.
If you consider that alternative energy stocks are generally viewed as an alternative to something -- oil -- then it makes sense that when oil gets more expensive, alternatives to oil would become both more price competitive, and more profitable for their shareholders. Turns out, that's exactly what's happening today.
As OilPrice.com reports, WTI crude prices and Brent crude are on the rise again today, up 1.8% and 1.4%, respectively. Moreover, oil prices have been climbing long enough now that it kind of looks like a new trend is developing. Over the last month, contracts for July delivery of WTI crude oil have enjoyed an 18% gain in price; Brent contracts for delivery in August are up 17.6%.
The longer these price gains continue, the more attractive alternative energy sources such as hydrogen fuel cells and solar power will become. It stands to reason that the longer the trend holds, the more valuable the stocks of hydrogen fuel cell companies (i.e. Bloom) and companies tied to the solar power industry (Enphase and SunPower) will become as well.
But will the trend continue? I have my doubts. First, because the U.S. economy, and the world's, are mired in recession, which won't be good for oil demand, or for any energy demand for that matter. And second, and perhaps more pertinently, because over the past few days, we've seen reports of oil companies in Iraq, in Saudi Arabia, and even here in the U.S. laying off workers in response to oil prices that are, despite recent gains, still pretty low historically. On top of all that, the head of Russia's sovereign wealth fund, Kirill Dmitriev, just went on record opposing further production cuts by OPEC -- cuts that, were they implemented, would have helped to decrease supplies and raise oil prices further.
When you combine this near-term negative for oil prices with the evident nervousness of the oil companies that are laying off their workers, I fear the next big move for oil prices -- and for alternatives to oil -- may be down, not up.