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In a recent series of articles I have argued that a convergence of factors is taking place which is likely to emphasize further the increasing politicization of oil and the necessity of a renewed push towards clean energy.

Critically, the US and the global economic cycles are dangerously exposed to the volatility in the price of one single strategic commodity - oil. In a previous article, I offered some estimates from the academic world of exactly how exposed the US economy is to a high and volatile oil price.

As the pro-democracy movement in the Middle East moves across borders to challenge one autocracy after another, it should be clear that an extended period of high and volatile oil prices is quickly becoming the gravest threat to the global economy.

There are a range of complex issues that need to be addressed in relation to the future of energy policy. However, policy-makers would do well to consider one simple question - and that is, why is it that countries who are not aligned with American interests, and who would in fact be net beneficiaries of higher oil prices, appear to be taking greater action to insulate themselves against the effects of higher oil prices than any government in the democratic West is currently doing?

This is a point that is made very poignantly by Gal Luft and Anne Korin in their book: Turning Oil into Salt, Energy Independence Through Fuel Choice.

Consider this: the following two significant oil producers are taking serious action to insulate their economies from high and volatile oil prices -

Iran: In 2005, Iranian President Mahmoud Ahmadinejad announced a three part program to reduce Iran's dependence on foreign gasoline. Iran obviously produces a vast surplus of oil. However, it lacks the refining capacity to meet its own domestic gasoline needs. Consequently, the plan involved -

  1. $23bn to build refineries and related plants.
  2. A deal to secure a supply of refined oil products from Venezuela.
  3. Conversion of domestic transport vehicles to natural gas (CNG). As well as being a significant oil producer, as of January 2010, Iran had an estimated 1,045 trillion cubic feet (Tcf) of proven natural gas reserves - second only to Russia. As a result of the above-mentioned policy, Iran had 1.67m natural gas capable vehicles on the road by the end of 2009 - of a total national fleet of around 11 million.

Venezuela: In April 2009, Hugo Chavez, President of Venezuela, unveiled his own plan. Venezuela had 176 trillion cubic feet (Tcf) of proven natural gas reserves as of 2010. Under the Chavez energy plan, car manufacturers would have to ensure that 30% of new cars sold in Venezuela are natural gas capable - mainly dual-fuel car models. In recent days, he has once again re-iterated this intention to push this plan.

In both Iran and Venezuela, in fact, the focus is on dual-fuel models. The engines in these cars can run on either gasoline or natural gas, but require a bulky second tank for the natural gas. However, the point is that the very fact that these regimes are taking such steps to break oil's monopoly in their transport sectors should raise a few eyebrows.

These facts largely speak for themselves. And if a re-configuration of Energy Policy is indeed ahead, it will no doubt benefit a range of clean technology stocks - both in transportation and power generation. Energy Policy must address both. I have written about these before. To recap once again: In solar, First Solar (FSLR) and SunPower (SPWRA). In wind – Vestas (VWDRY.PK) and American Superconductor (AMSC). For nuclear's contribution to a Clean Energy Standard, a straight ETF such as NLR is probably preferable. In biofuels, my preference is Pacific Ethanol (PEIX). For the electric car there are plenty – Tesla (TSLA), Ener1 (HEV), Valence (VLNC). I have a particular preference for A123 Systems (AONE). In natural gas transportation - Clean Energy Fuels (NASDAQ:CLNE) and Westport (NASDAQ:WPRT).

For now the point is clear - in the US and the rest of the democratic West, we have in relative terms done very little to insulate our economies against the coming period of high and volatile oil prices. Yet competing regimes are doing much more. China's five-year plan, for example, gives great prominence to clean energy and the need to reduce the country's reliance on foreign oil.

However, what is even more striking is that there are significant oil producers who have taken serious steps towards insulating their economies against the high oil prices.

You do not have to believe in conspiracies theories to get the point.

If you are on a ship and a storm is coming up, wouldn't it make you nervous to see some of the crew slipping on their life jackets.

Disclosure: I am long CLNE, WPRT, FSLR, SPWRA, OTCPK:VWDRY, AMSC, NLR, PEIX, AONE.

Source: Iran, Venezuela Protecting Against High and Volatile Oil Prices - Good for Clean Tech Stocks