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Obama’s Energy Policy: Sizing Up the Winners and Losers

In his inaugural address on January 21, Barack Obama briefly touched on energy and climate change.

Here’s what he said:

“We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations…  We cannot cede to other nations the technology that will power new jobs and new industries; we must claim its promise. That’s how we will maintain our economic vitality and our national treasure…”

This is in line with the President’s previous assertions about the environment and clean energy.

It’s also in line with science. Indeed, climate change is a real phenomenon – one that’s been occurring for millions of years. And higher temperatures have clearly impacted ocean levels and weather conditions.

Of course, whether or not we can stop or slow it down is another debate entirely. And it’s not one that concerns us at Oil & Energy Daily.

What concerns us is making money.

And although most everyone missed it, President Obama has been dropping clues that suggest 2013 will be one of the biggest investment years ever.

Four More Years

Perhaps the biggest move that the Obama administration has made in recent days is to nominate John Kerry as Secretary of State. Kerry is a noted “climate hawk,” and the much-debated Keystone Pipeline has been put under his jurisdiction for review.

I expect the pipeline to be approved. I also expect that the new regulations coming forth from the administration will be less onerous than many expect, since it’s facing economic pressure to enact rules, regulations and recommendations that promote growth and pave the way to greater energy self-sufficiency.

Of course, there will be sacrifices made along the way. The biggest sacrifice will occur in the coal industry, making it the biggest loser. And it’s already begun as coal miners are seeing more pressure than any other industry to “clean” up their act.

As a result, coal now supplies just 40% of all the power generated in the United States – down from 57% a few decades ago. Furthermore, the Energy Information Administration says that coal-burning facilities will slip to 10% of total new energy capacity in the United States in 2013, down from 18% in 2009.

So the trend is clear: Avoid coal.

Conversely, the prime beneficiaries from upcoming policies will be renewable energy and natural gas plays.

Of course, that’s not to say that renewable energy plays belong in your investment portfolio. Quite the contrary – renewable energy is the wrong place to put your money.

The industry only exists today because of government subsidies. And that’s no reason to invest in the future of a business.

Winning Resource Plays

Really, when you get down to it, there are only two big “winners.” And those are uranium and natural gas.

Indeed, nuclear power is the only source of renewable energy that makes sense from an economic perspective – not just in the United States, but around the globe. There are actually 104 nuclear reactors already operating in the United States, and another 24 have been proposed.

And nuclear is even more popular in emerging markets like China and India, where more than 150 nuclear reactors are awaiting approval.

So nuclear power may have its own set of controversies and safety issues, but it’s still the fuel of choice as far as clean energy is concerned.

Still, natural gas is an even better play.

Fracking has unlocked a huge supply of domestic natural gas in the United States. And while it’s not a “green energy” source per se, it’s still much cleaner than coal. It’s also cheaper.

As a result, natural gas demand is set to rise 17% by 2017, according to the latest report by the International Energy Agency (IEA).

Indeed, from pick-and-shovel plays and pipeline operators, to major multinationals that have staked claims to large parcels of land – there’s a wide range of profit opportunities in the natural gas arena.

And in the next few issues, we’ll be covering specific opportunities that will benefit from this new generation of energy policy.

And “the chase” continues,

Karim Rahemtulla