Can Alternative Energy ETFs Overcome Low Oil Prices?

March 24th at 2:39pm by Tom Lydon

Alternative energy, and related exchange traded funds (ETFs), are a mainstay within the investment scope, however, in a pragmatic light the case for supporting these investments at the moment is becoming more difficult.

“Traditional” energy, or your basic oil and gas, is keeping Wall Street’s attention right now, and the fact that oil is around $52 per barrel is supporting this. Jeff Benjamin for Investment News reports that even the 7% spike in crude oil is not enough to rally alternative energy shares.

Everybody knows that alternative energy is big on President Obama’s list, but its going to require huge tax credits and the investment money is just not flowing into those areas right now.

For the time being, alternative energy is looking more like a luxury rather than a necessity, says Benjamin. Even if crude oil climbs to the $60 range as some are forecasting, the price will still be 60% below the $147-per-barrel peak it reached in July. Will that be enough to scare people straight again?

The fact remains that wind and solar power are still about three times the cost of natural gas energy. Insiders who manufacture parts for alternative energy production claim that 80% of the cost is going overseas where parts are made.

  • United States Oil (USO): down 7.1% year-to-date

  • iPath S&P GSCI Crude Oil Total Return Index (OIL): down 13.9% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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