September 21, 2007
Oil prices go up, but uranium down
The argument since 2004 was that with oil prices rising to record highs, industrialised countries would turn back to nuclear power as a cheaper source of energy. Uranium, the fuel of the nuclear industry, prices reacted to that argument, surging since 2004 to reach in June a record high of $136 a pound.
But the close relationship between crude oil and uranium prices fell apart during the summer and recently prices had moved in completely opposite ways. This week, crude oil prices surged to an all-time high of $84.10 a barrel while uranium prices fell their lowest level since March of $85 a pound.
Despite the price drop, uranium is trading well above its $10 a pound historical average. Indeed, uranium prices are today a 700 per cent higher than in January 2003, while crude oil prices are just a 150 per cent higher. And most Wall Street banks are still bullish.
Uranium prices have jumped on the back of rising demand from new nuclear reactors, the life extension of plants, and supply bottlenecks. UBS forecast that higher demand and slow supply increases would push prices to almost Dollars 200 a pound in 2008.
Mined uranium satisfies only 55 per cent of global consumption, with the rest coming from dismantled Soviet-era nuclear warheads, government stockpiles and reprocessing. Demand is expected to increase sharply in the next decade as new nuclear power plants join the world’s 437 reactors.
There are 74 reactors under construction and another 182 planned, according to the World Nuclear Association, the industry body. China, with 23 plants going up and a further 54 planned, accounts for the bulk of the increase.
