For the most part, U.S. and global investors were OK with last Friday morning's massive earthquake in Japan. The S&P 500 dipped into the red briefly that morning, but rallied back for a modest gain by the end of the day to end the week.
Over the weekend though, it took investors about a nanosecond to decide that radiation leaks in four of Japan's nuclear power plants ultimately spelled doom for the nuclear power industry, and uranium miners as well.
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Investors Flee Uranium Stocks
Shares of uranium providers like Uranium Resources (Nasdaq:URRE) and Uranerz Energy Corp. (AMEX:URZ) were both down in a big way on Monday and Tuesday, based on fears that demand for uranium would plummet. Construction companies like Shaw Engineering (NYSE:SHAW) also saw their shares plunge on concerns that the focal point of its future - building nuclear power plants - was in jeopardy.
Was it the right call, or a knee-jerk reaction that will be undone in the near future? If history is any clue, it's too soon to say nuclear power is going to be shelved.
After all, American investors - and investors in general - have short-term memories. Remember the North/South Korean conflict from late last year? The likely outcome and global impact varied from one source to the next, but visions as wild as the beginning of a war between the U.S. and China were put on the table. Of course, the conflict is barely even a faded memory now.
The media loves to make mountains out of molehills when it comes to suggesting the long-term consequences of catastrophes and political turmoil. The swine flu breakout in March of 2009 is a great example. It was awful to be sure; it was also deemed by many to only be a "preview" of the major health crisis that had yet to unfold - but never really did to the extent that many experts predicted.
The biggest reason that nuclear power is likely to stick around is that there's little choice when it comes to nuclear power, not just in the United States, but globally. Over 20% of the electricity generated in the U.S. is driven by 104 nuclear reactors, and 14% of the world's total power needs are met by 440 nuclear power plants. Replacing them all, or even some of them, would be an enormous undertaking.
The Rest of the Story
As if the underlying investor tendencies don't already suggest today's nuclear power worries will fade away soon enough, there's one more detail that needs to be added to the discussion: Three reactors have been identified as damaged and potential radiation risks. All three of them, however, are reactors at the same plant - the Fukushima complex. Since then, two of the three damaged reactors have been contained, but the third, badly-damaged one is the one people are most concerned about.
What is less realized, however, is that the Fukushima plant was built in the 1970s, while the other 16 nuclear power plants built in Japan in roughly the same time period are intact and unaffected by the tsunami. The media hasn't touted this fact, and has preferred instead to concentrate on the worst-case scenario.
That's not to say that the plants Japan built in the '70s haven't been updated or improved. However, new designs and builds would certainly be even more resilient, thanks to three more decades of nuclear power know-how.
The Bottom Line
As is so often the case, worries of a repeated catastrophe will swell and crest soon, and the world's affinity for cheaper and easier energy will take center stage again. And, the minimum of $18 billion the government has set aside for new nuclear power projects in the United States will get back to work. Indeed, the number could reach $54 billion if President Obama plays his political cards right.
In other words, in the grand scheme of things, this will likely only be a blip for nuclear power.
Although still deep in the red from a very nasty bearish gap on Monday and Tuesday, nuclear power and uranium stocks Uranerz Energy, Cameco Corp. (NYSE:CCJ) and Exelon Corp. (NYSE:EXC) may be presenting an opportunity for investors who feel the consequences may be overblown. (For related reading, take a look at Going Green With Exchange-Traded Funds.)
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