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  • Nuclear Explosions In Japan: What It Means For Energy Investments 0 comments
    Mar 15, 2011 1:13 PM | about stocks: ICLN, GEX, NUCL

    By Gary Cassady

    Following a third explosion and fire at the Fukushima plant, low levels of radiation have leaked into the atmosphere which spurred the recommendation that Japanese residents within an 18 mile radius stay indoors.

    Prime Minister Naoto Kan said, "The possibility of further radioactive leakage is heightening… We are making every effort to prevent the leak from spreading. I know that people are very worried but I would like to ask you to act calmly."

    Of further concern now is the rumor that a fourth reactor is boiling and the water level may be falling. Despite multiple safety measures taken by the plant, the compounding effects of the earthquake followed by the tsunami were able to breach all three backup safety measures in place to ensure that the nuclear fuel rods remain adequately cooled to prevent a meltdown and ultimate explosion.

    Currently, seawater is being utilized to help cool the rods, but after explosion number three -- and a fourth explosion looming -- it does not appear that there will be a positive outcome from this method. As officials continue to try to contain the ongoing nuclear crisis, it is interesting to examine the broader implications for nuclear power as a viable energy source.

    In France, a country which relies primarily on nuclear energy for its electricity (almost 80%), there have been protests demanding an end to this reliance following the disaster in Japan. Protestors cite the fact that even though there were seemingly adequate back-up plans to avert a crisis of this kind, nature was able to trump man-made technology.

    However, France is unlikely to experience earthquakes of this magnitude because it does not lie on tectonic plate boundaries. Japan on the other hand, lies on plate boundaries which make the country more prone to earthquakes as the plates interact with each other. Perhaps the protestors' worries are unfounded and based more on ignorance and fear than actual scientific evidence.

    Perhaps a better policy concern is the location of these nuclear power plants. As the Japan earthquake and tsunami so tragically demonstrate, nuclear plants residing in areas over plate boundaries may not be the best idea.

    Regardless of the scientific evidence supporting or refuting the usage of nuclear power, investors should consider several nuclear energy-related stocks and how this crisis will affect them long-term. For example, the iShares S&P Global Nuclear Energy Index (NASDAQ:NUCL) dropped 11% from Friday's close to Monday's open before finishing at 8% below Friday's close. Investors who believe in the long-term use and acceptance of nuclear power may consider a long position in this ETF.

    However, those who believe this crisis will be used as an example for the elimination of nuclear energy may consider long positions in renewable energy-based stocks and ETFs like Market Vectors Global Alternatve Energy ETF (NYSEARCA:GEX) or iShares S&P Global Clean Energy Index (NASDAQ:ICLN), both of which are focused on in investments in alternative energy companies.

    Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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