Uranium Booms. Oil To Follow If Climate Rules Soften

Cautious investors will remain wary of uranium even as the nuclear fuel trades at a 15-year high of $80 a pound with the promise of more to come as market and geopolitical conditions look alarmingly like a repeat of 1973.

Back then a war in the Middle East followed by an oil export embargo imposed by the Organization of Petroleum Exporting Countries (OPEC) sparked a 150% rise in the oil price with uranium joining the boom, though only for six years.

From less than $10/lb uranium rose to $40/lb, driven by a flood of orders for nuclear reactors to combat the oil squeeze. That boom ended in 1979 after a partial meltdown at the Three Mile Island power plant in Pennsylvania.

Uranium was dealt a second blow when the Chernobyl project in Ukraine suffered a full-blown meltdown in 1986, with a third blow landing when Japan’s Fukushima project was knocked out by an earthquake and tsunami in 2011.

Under the three-strikes and you’re out rule, uranium should by now have faded from the global energy sector.

The fact that it remains a vital and growing source of power highlights the importance of nuclear energy as a source of low carbon electricity, a point which will feature at the United Nations sponsored COP28 climate conference which starts on Thursday in Dubai.

Europe is leading the latest nuclear renaissance in an attempt to plug a hole in its power supplies caused by a ban on Russian oil and gas and the rushed closure of coal-fired power stations.

“Green” Uranium

But to achieve a nuclear revival Europe has fiddled the rules by reclassifying nuclear power as “green” because of its low carbon footprint.

That subtle shift in taxonomy, the process of classifying something, has led to nuclear power winning a prominent slot in the COP28 program with the greatest interest in a new generation of small modular reactors (SMRs).

Uranium’s U-turn from environmental enemy to environmental friend has played a role in the price recovery which started with speculative investment funds buying and has now spread to power station operators keen to secure scarce supplies of the fuel.

Oil, surprisingly, could be next to get an invite into the climate change tent with a potentially significant effect on prices and while that possibility might horrify environmentalists there were two unofficial invitations issued last week.

Big Flip

The first came from the International Energy Agency, a quasi-government organization, which has just flipped from a strongly negative stance against fossil fuels to recognition that they will continue to play a crucial role in power delivery.

Two years ago, the IEA said no new coal mines or oil and gas fields should be opened if the world is to reach a net-zero carbon emissions target by 2050.

The new view from the IEA is that oil and gas will be needed in every energy scenario.

Wood Mackenzie, a commodity-sector consultancy, picked up the pro-oil theme in report published ahead of the COP28 conference saying that oil and gas companies should be “brought in from the cold.”

Oil and gas, according to Wood Mackenzie, has a role to play in delivering low-cost energy and “the capital to develop low-carbon energy”.

Just as the debate around uranium and nuclear power flipped from extreme negative to recognition that they have a role to play in delivering low carbon electricity the Dubai conference could be the start of recognizing that oil and gas has a role to play in helping fund the shift to cleaner power.

“Back in the tent, there’s a golden opportunity for international oil companies and national oil companies to build credibility as agents for lower methane emissions by embracing more ambitious and binding commitments,” Wood Mackenzie said.

Oil and gas are not in the tent, yet, but the flap is opening as critics start to recognise that fossil fuels might be a cause of climate change but they are also part of the solution.

This article was originally published by a www.forbes.com . Read the Original article here. .