Skip to main content

Future of Black Gold Remains Cloudy

Although the overall health of the economy seems to be improving, future U.S. demand for crude oil appears to be slow.

NEW YORK (

TheStreet.com

) --

Despite encouraging economic indicators suggesting that the overall health of the economy is improving, there have been signs that future U.S. demand for crude oil will be slow, putting a damper on the volatile commodity.

Improvement in U.S. GDP and the real estate markets are both indicators that the nation's economy is slowly on the mend and in general as economies recover and grow, demand for black gold follows.

However, this time it doesn't seem to be the case. Most recently, the Energy Department released a report indicating that crude stockpiles rose 128,000 last week as compared with forecasts for a 1.15 million-barrel reduction suggesting that demand for crude is just not there.

Additionally, the emergence of alternative energy is on the up and up and continues to flourish. In fact,

DuPont

(DD) - Get DuPont de Nemours, Inc. Report

has invested nearly $120 million in solar energy and expects a rapid growth in the photovoltaic market. To make investing even more attractive in alternative energy, the U.S. Energy and Treasury Departments announced that they will hand out $2.3 billion in tax credits to clean energy equipment makers.

In the U.S., energy from wind has become a phenomenon as well. In 2008, wind projects accounted for 42% of new electric capacity and enabled the U.S. to supply nearly 2% of its power from the energy source. In addition, energy from wind grew an astonishing 60% in 2008, making the U.S. the leader in extracting energy from the natural resource.

As long as the economy continues to show signs of weakness, as evident by a lackluster report on consumer confidence by the

Reuters

/University of Michigan Surveys of Consumer Reports, and alternative energy continues to remain attractive, the demand for black gold will most likely continue to be hindered.

TheStreet Recommends

From an investor's perspective, a few ways to benefit from these trends are through the following equities:

First Solar

(FSLR) - Get First Solar, Inc. Report

, which is up 21% from a March low of $103.97 to close at $ 125.88 on Thursday.

Clean Energy Fuels

(CLNE) - Get Clean Energy Fuels Corp. Report

, closing at $12.78 on Thursday, a 172% jump from its March low of $4.70.

Investing in these equities involves risk, and a good way to minimize this risk is through the implementation of an exit strategy. According to the latest data from

SmartStops

, an upward trend in these equities could come to an end at the following price levels: First Solar at $115.66 and Clean Energy Fuels at $10.92. Keep in mind that these price levels change on a daily basis and updated data can be found at

SmartStops

.

-- written by Kevin Grewal in Laguna Niguel, Calif.

None.

Kevin Grewal is an editorial director and analyst at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, he was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.