After a breakout of unrest in the Middle East and now the widespread media coverage of the nuclear power plant saga in Japan, people are focusing on the energy sector and energy related exchange traded funds (ETFs), such as basic crude oil to alternative energy.
Oil. Crude supplies are still at risk as the unrest in Bahrain has intensified, with demonstrators and police. The fear is that the unrest will spill over into Saudi Arabia, a major producer of oil. The nuclear uncertainty in Japan is also affecting oil prices, as oil-market participants remain fixated on reports of damage to Japan’s Fukushima Daiichi nuclear-power complex. Analysts believe oil prices would be higher if the geopolitical tensions and disaster in Japan were not a factor. [How Geopolotical Risk Is Affecting Oil ETFs.]
- US Commodity Brent Oil Fund (NYSEArca: BNO)
Nuclear Energy. As news of Japan’s power plant spreads, nuclear power stocks took a nosedive on renewed fears of potential problems with current and future power plant projects. Speaker of the House, John Boehner said on Monday that there will be meetings to discuss the Japanese nuclear power plant situation and the potential for similar catastrophes here in the U.S., which means that future nuclear projects will likely include costlier added security. However, if damages in nuclear plants in Japan are contained, or not as bad as feared, don’t expect big changes. [Will Current Affairs Deter Interest In Nuclear ETFs?]
- iShares S&P Global Nuclear Energy (NYSEArca: NUCL)
Coal. After Australia was struck by a massive flood, the subsequent crisis in Queensland will likely hurt the region’s ability to produce coke coal. Australia’s role in coal production is no small matter. The country produces 60% of the world’s supply of coke coal. The continent is the largest supplier of steel-making coal and is second in exports of power station coal. [Coal ETFs: Can They Hang Onto Gains?]
- Market Vectors Coal (NYSEArca: KOL)
Solar. As nuclear-power stocks experience a sell-off, the alternative-energy sector saw increased inflows, which experts believe will continue in the coming months. Alternatives usually come into favor when there are natural disasters related to oil and nuclear energy or when pricing gets too high.
- Guggenheim Global Solar (NYSEArca: TAN)
Wind. Government incentives and profitability in alternatives continue to be relatively low. Nevertheless, increased public pressure and government mandates could be a boost in the arm for alternatives. For the short-term, solar ETFs seem to be more favorable than wind-focused ETFs, writes Ron Rowland for Money and Markets. Rowland suggests that this uptick in alternative energy could be an overreaction to current events.
- First Trust Global Wind Energy (NYSEArca: FAN)
For more information on the alternative energy industry, visit our alternative energy category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.