
Love Uranium
Peter Huber 11.27.06, 12:00 AM ET


A pound of uranium oxide costs $60, six times as much as it did three years ago. The spot price of oil has roughly doubled during the same period. Coal from Wyoming's Powder River Basin has swung between $5 and $20 a ton, from central Appalachia between $35 and $65. This seems to suggest that what's volatile is the price of energy, not the price of oil. Also, that the volatility has little to do with a planet running on empty. The earth certainly isn't running out of uranium or coal. And for all the talk of the end of oil, humanity will still pump a lot more crude in 2006 than it did in 1996.

Why do the prices of such different fuels often move in tandem? The fuels are certainly different. Coal and uranium are much more difficult to handle, and they are therefore used almost exclusively in big electric power plants. Oil is far more versatile and remains, for now, the only practical choice for transportation. But economic growth boosts energy demand across the board, and there is more cross-fuel competition than is commonly recognized. Electricity substitutes for oil and gas in heating and industrial processes. Coal and uranium compete with natural gas in electric power plants, and gas competes with oil in industrial processes and fleet vehicles. How much more cross-fuel competition occurs is determined by how well technology can move energy between the grid on the one hand and factories, homes and wheels on the other. As it happens, bridging technologies are improving fast.

The big economic difference between uranium, coal and oil centers on the cost of technology and capital. Because oil is such a dense high-grade fuel, it is quite cheap to transport and requires comparatively little refinement. A change in the price of crude therefore has quite a big impact on the price paid at the pump. The price of coal-fired and nuclear electricity, by contrast, depends mainly on the cost of railways, centrifuges and power plants. Even a fivefold increase in the price of raw uranium oxide has little impact on the price of nuclear power.

Oil, coal and uranium diverge even more sharply at the front end of the supply line, where producers dig and drill. The largest reserves of the cheapest oil lie under land controlled by autocrats and feudal theocracies. Stable, democratic governments control abundant supplies of uranium and coal. But even the worst governments can buy uranium oxide and, with patience, convert it into weapon-grade uranium or plutonium, and the very worst are the most determined to do so.

Then, finally, there's the planet again. Carbon, we are told, will warm the planet; uranium will irradiate it.

Most voters probably understand that such tradeoffs exist, but few have any real grip on the practical realities that keep carbon and uranium so dominant. For politicians who must answer to voters, the easiest way to deal with the unwelcome facts is to say one thing and do another. So year after year, Washington promises the feel-good fixes--efficiency, wind, solar and ethanol--but quietly leaves it to private capital to keep the lights lit and the cars running. And when they're spending their own money, investors pursue carbon and uranium, because no other fuels are even close to competitive. Efficiency attracts a lot of money, too. But with all the money they save on fuel, consumers then buy still more fuel-consuming hardware--big cars, computers and refrigerators, and more trips to Aruba. So efficiency and consumption rise hand in hand, year after year.

The politicians don't do more to transform the energy economy because they can't. The U.S. currently spends $500 billion a year on carbon and uranium fuels, and the companies that extract and deliver them represent several trillion dollars in market capitalization. These aren't very big numbers in a $10 trillion economy or compared with the $20 trillion of equity traded on the NYSE. But they dwarf any subsidies, taxes or mandates that elected politicians interested in their own survival will ever impose to reinvent energy.

Only one government initiative is both affordable and practical enough to have a major impact over any time frame measured in years rather than generations. Establish a regulatory and legal environment that will give private investors the confidence to back nuclear power to the hilt. And guard nuclear fuels, technologies and wastes securely, in the civilian sector as in the military.


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