Energy Investing For Dummies

Nick Hodge, Jeff Siegel, Christian DeHaemer, Keith Kohl

• Publisher: For Dummies
• Year: 2013
• Print ISBN: 9781118116418
• eBook ISBN: 9781118233238
• Edition: 1
• Topic: Business
• Subtopic: Commodities
• Index: Business

The fast and easy way to grasp energy sectors and their place in the global economy

With timely, substantial information about energy stocks, Energy InvestingFor Dummies teaches the ins and outs of energy sectors and how to incorporate them into business and investment plans. As a savvy investor and business manager you will find the important information and advice you need to incorporate these growth areas into your investment portfolio.

In EnergyInvestingFor Dummies, you'll find important information on the big-three markets of electricity, natural gas, and oil; growing markets for liquefied natural gas, emissions, coal, and alternative energy; primers on advanced topics like storage, wheeling, load forecasting, and pipeline transportation; tips oninvesting in and trading energy stocks, ETFs, dividends, and derivatives; and much more.

• Includes examples of ways to invest in wind power, carbon emissions, thermal solar power, and other new markets
• Packed with the latest information onenergy investing
• Shows you how to incorporate energyinvesting into your investment plans

Energy Investing For Dummies is your friendly, un-intimidating guide to this hot topic in business and investment trading.

Part I

Getting Started with Energy Investing

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In this part . . .

Get a brief history of energy development and investments.

Examine the data to see how the need for energy is constantly growing.

Discover how energy is used, even in hidden ways, all around you.

Learn what you need to make your first energy investment.

Identify the risks and rewards of energy investing.

Chapter 1

Powering Your Portfolio: Energy in Brief

In This Chapter

Defining energy

Understanding why energy makes for a great investment

Knowing the risks

Identifying the various ways to invest in energy

Energy is the most vital industry the world has ever seen. It generates the most revenue and it’s a foundational requirement for all other industries. Apple needs energy to make its computers and run its warehouses full of servers. Walmart needs energy to transport its goods and keep the lights on at its thousands of retail locations. As such, the energy market is fertile ground for investment.

But where does one start? With so many sources of energy and companies to choose from, a beginner can become overwhelmed very quickly. Unlike other sectors of the market, like restaurants or retail, for example, investing in energy is about much more than just individual companies with a singular goal. Energy crosses borders, both geographically and in the way it upends the traditional approach of categorizing companies with neat and tidy labels.

Apple is a technology company; Walmart is a retail company. That’s pretty straightforward. But what is Exxon, which trades on the New York Stock Exchange (NYSE) under the ticker XOM (written as NYSE: XOM)?

Is it an oil company? A natural gas company? A refiner? A retail gasoline company? A commodity trader? You get the idea. The point is that it and many other so-called major integrated oil and gas companies, or majors, is all of the above, and sometimes more. BP (NYSE: BP) and Shell (NYSE: RDS-A), for example, are also solar, wind, and biofuel companies, which also makes them technology and agriculture companies.

This diversity is what makes the energy market so unique and such a great place to invest in. The energy market involves exploration, mining, processing, refining, retail, shipping, pipelines, technology, and more. And you can invest in companies at every step of the process, whether they do it all or specialize in one or two parts of the chain.

What Is Energy?

Before simply jumping in, I’d like to define energy as I cover it in this book. It’s important to know the nature and scope of a market you’ll be putting your hard-earned dollars into. The Merriam-Webster Dictionary definition of energy breaks it down into several parts.

Energy

Has a dynamic quality

Is a vigorous exertion of power

Is a fundamental entity of nature that is transferred between parts of a system in the production of physical change within the system, and is usually regarded as the capacity for doing work

Is usable power (such as heat or electricity) or the resources for producing such power

For investment purposes, I like a combination of the third and fourth definitions. To put a finer point on it, the two types of energy are primary energy and secondary energy.

For an energy source to be primary, it must naturally exist in nature. Primary energy sources can’t be man-made. Primary energy is the primary focus of this book and includes

Crude oil: The most widely traded commodity on the planet, oil fulfills one-third of the world’s energy needs. From exploration and drilling to refining and distribution, oil presents myriad investment opportunities. I cover the crude basics in Chapter 6, futures trading in Chapter 8, producers in Chapter 9, and funds in Chapter 10.

Natural Gas: This was once considered a waste fuel, as companies routinely burned it off just to get rid of it. Today, thanks to new drilling technologies and concerns about oil depletion, natural gas is being looked to as the fossil fuel of the future. I spell out what you need to know in Chapter 7.

Coal: No other fuel provides more electricity than coal. Forecasts show that coal will surpass oil as the world’s top fuel source by 2022. It’s cheap and abundant, but it’s also dirty. I give you coal fundamentals in Chapter 11, analyze coal’s future in Chapter 12, and chronicle investment opportunities in Chapter 13.

Uranium: Many countries are looking to provide emission-free electricity with nuclear reactors, especially in Asia. China alone has plans to build more than 150 new reactors. But even though nuclear has been proven safer than other fuels, high-profile incidents make nuclear the most contentious of all energy sources. You can find a nuclear overview in Chapter 14, uranium life cycle and mining info in Chapter 15, and the best ways to invest in Chapter 16.

Solar Energy: In a single second, the sun produces enough energy to meet current global needs for 500,000 years. The world just hasn’t quite figured out how to efficiently harvest it yet. But the process of doing so is now big business. I shine light on solar investments in Chapter 17.

Wind energy: Already cheaper than coal and nuclear for electricity production in certain areas, wind has attracted the attention of countries and companies worldwide. Wind is a very young market with much room to gr...

Table of contents

• Cover
• Title Page
• Table of Contents
• Introduction
• Part I: Getting Started with Energy Investing
• Part II: Oil and Gas Investments: Greasing the Global Economy
• Part III: Investing in Coal
• Part IV: The Nuclear Option
• Part V: Investing in the Future: Modern Energy
• Part VI: The Part of Tens
• About the Authors
• Cheat Sheet
• Connect with Dummies