With oil prices hitting $92 a barrel and could possibly go higher, corn and soy ethanol are sounding pretty cheap and are beginning to be a real alternative, not just something we talk about. E85 can even be found for under $2.00 a gallon in cities scattered across the United States, where gasoline sits almost a whole dollar higher.

Companies like Archer Daniels Midland Company (NYSE:ADM) and U.S. Global Investors Global RES (MUTF: PSPFX) are hitting highs on rising gasoline prices. While oil supplies are disappearing at a rapid pace, ethanol has finally become a cheap alternative to oil. Companies like Pacific Ethanol Inc. (NASDAQ:PEIX) and MGP Ingredients (NASDAQ:MGPI), which are trading at lows, could be staged for a comeback if oil prices continue to stay at highs.

It’s easy to forget about these renewable resources when oil comes back down, but remember renewable resources never go away. Prices can only get cheaper as interest grows and new technologies are invented to produce ethanol as well as other sources or energy cheaper.

Rising oil prices have also brought more attention to alternative energy such as solar power. Just recently HelioVolt raised $101 million for producing their flexible solar panels. SunPower Corp. (NASDAQ:SPWR) as well is making solar panels for homes and businesses that want to become more energy efficient. While in the past alternative energies have not been embraced, this could be the time to start noticing their benefits to society. Historically oil prices have increased during the winter seasons and that is what we are heading into.

Hi, Alex. Great first post. Welcome to InvestorGeeks.

I and the other geeks are excited to see your fresh perspective on the blog.

Alternative energy (and I think Solar Power in particular) is definitely going to outperform the market over the next 5-15 years. The question is: how to invest now?

We don’t know who the winners will be… or who will make the big breakthroughs in tech and business. I’d say buy 3-4 of the biggest players and watch’em closely to make sure they’re not dropping the ball.

I’d be building a position in those 3-4 stocks when alt energy is weak (not now)… although, it’s very unlikely these stocks don’t go higher than their current price, they do fluctuate a lot and you can get some nice discounts.

The high price of oil puts these stocks on our radar, but the real time to buy them is when oil is low. All of these stocks were trading at 50% (that’s out of my ass) when oil was down at $60 a barrel. If you don’t like being contrarian, you can wait a bit to catch the trend (i.e. try to buy when oil is going 70-90).

I’m not on top of things, but I’m not sure oil will be able to break the psycho barrier of $100 very easily. You are correct that oil prices generally go up through the winter. They also generally go down during election years… I wonder how that will effect things. Hmm..

In a related subject, does anyone know why oil is at $90+ but my gasoline is still under $3? I really need to understand the economics of oil more, and that would be a good place to start.

I want to start by saying that I am a lay person who does not fully understand the inner workings of the market. However, I have a few questions.

1. What were the trends of some of the “big hitters” in alternative energy when oil was down? I know Jason said he made up some statistics to illustrate his point, but I would be interested in some analysis as to trends of alternative energy stocks compared with oil prices – also interesting would be stock trade percentage of these stocks, i.e. why have days in the past been strong or weak days for energy stocks in relation to oil stocks?

2. When is a good time to buy? I know Jason pointed that when oil is cheap, people will forget about alternative energy, and that is the key time to invest. However, Alex asserts that with the upcoming cold winter, alternative energy companies will be more appealing than ever. Is there a way to coalesce these ideas into optimal (or sub-optimal) times (not necessarily dates but when market indicators hit certain marks)?

3. How has the election years influenced the prospects of alternative energy? The only response addressing this is based on oil. I’d be curious to know if alternative energy is proportionally or inversely related to this “principle”.

4. Finally, are there any good resources to read up on alternative energy “big hitters” such as the ones Alex mentioned? Where would one read about this, find out about others not listed, competitors, etc.? Or is this basic financial research that one should already know?

Ryan, great points. I’m looking for some illustrative charts. You can do this yourself through the United States Oil Fund (ticker USO), which I believe is bench-marked to US oil prices.

So far, I’m not seeing a lot of correlation with a company like SPWR (which has just gone straight up basically), but the correlation is a bit more clear with a stock like ESLR (which has been relatively level over the past year, but moving up and down in sync with oil prices).

In general, I’m just stating the obvious that it’s good to buy when the stock prices are low rather than high… especially when you are thinking long term.

#3 is an interesting point. I’m remembering how oil (really gas) prices were “kept” low before the 2004 election. People suspected that Bush was actively doing this or in the very least, people (oil countries) who wanted Bush in power were doing it… or investors were expecting it and kind of forcing it to come into existence.

couple interesting reads from that time:

However, you make a good point I think that alternatively energy is becoming more and more important in politics. For instance, if a democrat takes the white house next fall, I’d expect alt energy stocks to get a boost (as gov incentives are more likely to follow).

Alternative energy stocks seemed to have taken off since Summer-Fall 2006 (when the dems took the Senate)… related? We also had that movie “an inconvenient truth”. I think it is reasonable to believe that increased political rhetoric on the subject has increased funding, speculation, and stock prices. And I think it is reasonable to believe that more dems = more talks about these things.

I’ll be on the lookout for some good resources. To be honest, I’m not a professional here either. We should all share our info. 😉


In today’s economy we really have a disconnect between price per barrel and price we pay at the pump. Almost half the price we pay at the pump is local and federal taxes. This means that price can fluctuate between a pretty large amount. Also price does not always follow the price per barrel, but the amount of oil reserves and the amount that is refined or being refined at the time of high barrel prices.

As for Ryan’s question, a good place to start looking at alternative energy is http://www.altenergystocks.com. This website will help you to understand where alternative energy is moving and its comparisons to oil. You may also be interested in reading this article on their site: http://www.altenergystocks.com/archives/2007/10/investing_in_renewable_energy_101.html

Another good example of a correlation is USO and ethanol related stocks. If you look back to 2006 where oil was hitting new highs, PEIX and MGPI were up over double of what USO gained. While we see these ethanol stocks trading at lows right now I think that because there are so many more players in ethanol then there was a year ago it will take more research to chose the ones you feel will become stars in your portfolio. You may want to look at ethanol related companies or alternative energy companies that will be producing in emerging markets like China or India where they have almost an infinite amount of room to expand.

Hope this helps you in finding your answers.

Comments are closed.