As you consider alternative energy (solar and wind, in particular) keep their relative size in mind.

Solar is currently 1% of 7% of US energy sources.  Wind is currently 5% of 7% of energy sources.

While those sources may grow tremendously, and while some of the companies in the space may do very well, the nation will have to invest heavily in more traditional energy sources in the short-term to make a significant difference in supply and prices.

Alternative energy may be our future, but our immediate solutions must come from traditional energy sources and/or conservation.

There may well be more profit potential in clean coal investments or coal liquefaction or coal gasification, for example, that in wind or solar over the short-term.

This situation may be useful in making choices between ETFs such as:

• TAN (solar)
• FAN (wind)
• NLR (nuclear)
• KOL (coal)
• USO (oil)
• UNG (gas)

The chart above is what the US Dept of Energy, Energy Information Agency says about current energy sources.

Richard Shaw
QVM Group LLC

Countries that require less energy per unit of GDP may fare better during a period of high energy prices.

This table shows the Kg of oil equivalent consumed per unit of GDP on a purchasing power parity basis for 32 countries, as reported by the United Nations.

This data is not a measure of energy use efficiency, because it does not distinguish between countries with high energy intensity industries (such as steel making) versus those with low energy intensity industries (such as software).

The data also does not indicate how much margin exists to be more efficient if necessary.

Interesting observations, include that the United States and China have similar energy consumption per unit of GDP, although the US figures probably include a much higher personal energy use component as part of the overall energy use.

Also, India uses only about 82% as much energy per unit of GDP PPP as China.

Russia uses the most energy to produce its GDP.

Brazil consumes less energy for its GDP PPP than Japan.  Given that Brazil is essentially energy independent of the rest of the world and is an energy exporter, and given that Japan is an energy importer, Brazil might be expected to fare better than Japan when dealing with rising energy costs.

Richard Shaw
QVM Group LLC

[securities mentions in this article: EWH, IRL, EWL, EWI, EWU, EWO, EIS, EWP, EWZ, EWJ, EWG, TUR, EWQ, ECH, EWW, EWN, INP, EWK, THD, EWA, EWD, VTI, FXI, EWY, EWS, EWM, IF, EWC, EZA, RSX]

“Mark Mathew of Merrill Lynch has said that India will be amongst the least preferred markets in Asia if oil stays high. The food price and inflation concerns not as serious as crude”, according to MoneyControl, and Indian financial portal.

He did not specifically address China in that article.  Did he mean that India would fare worse than China or worse than most Asian countries?  We don’t know.  We hope to hear more from him on that question.

We would have thought that India would be somewhat less sensitive to spiralling energy costs than China, because India is less manufacturing intensive in its export business than China.

Here is a table of total energy consumption for oil, natural gas, coal and electricity in India and China. [note that electricity consumption is duplicative of oil, gas and coal consumption, except for nuclear, hydro and other sources]

If, in fact, either China (proxy FXI) or India (Proxy INP) will suffer significantly more than the other due to energy costs, there may be an opportunity to short the most energy cost sensitive one against the least energy cost sensitive one. That question may possibly deserve further evaluation.

Of course, if you do such a trade effectively and oil backs down, the trade would then go against you.  Given oil price volatility, you would need wide tolerances for profit swings in the position.

Richard Shaw
QVM Group LLC