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Page 1 of 2 Nuclear energy – say what you will about all of the problems associated with it – does have the advantage of being a carbon-emissions-free energy source, as good or better than solar and wind power. From a pure climate change and air quality perspective, nuclear is pretty green. But is nuclear energy going to play a larger role in electricity generation in the future? It is hard to tell. President Obama's recent signings of executive orders aimed at moving the country toward energy independence and addressing the issue of climate change made no explicit mention of nuclear's possible role, though many believe his appointment of Energy Secretary Steven Chu – a Nobel Prize-winning physicist who talked favorably about nuclear power during his confirmation hearings – speaks volumes. Despite this potential pro-nuke policy stance, however, uranium – the commodity investor's play on a nuclear resurgence – has been ailing. What gives? Uranium Price Performance As we've covered now and then here at HardAssetsInvestor.com, while there is a market price for uranium, it is not traded like oil with a futures market that everyone can participate in. Uranium prices are determined (for public consumption) by the public information arising from private contracts between producers and suppliers. The prices that come from these transactions make up the "market" price that companies use as a benchmark for their own transactions. In this regard, it shares much in common with some other big industrial inputs, like iron ore and coking coal. Compared with its historical stagnation, uranium ran up like crazy in the past year, going from around the $10 per pound mark to an all-time high of around $140. Current prices are a more modest $48 a pound as of January 26. 
How can we explain this wild ride? Demand is steady – as of November 2008, there were 439 nuclear reactors in operation, and that number hasn't changed much in some time. The industry is expanding a little – as of October 2008, there were 38 reactors under construction worldwide (stats here) – but most of those reactors are still years away from coming on line. For the most part, the excitement of 2007 seems to be just that ... excitement ... driven by expectations of a wave of new nuclear construction projects. Supply Paradox The prospect of new construction gets uranium investors excited because the uranium market is in a chronic situation of undersupply. The chart below comes from TradeTech, another uranium consulting group. 
The gap in supply is made up for from old stockpiles and retired nuclear weapons. Some believe that any increased demand could tip the balance, and that there might not be enough supply to meet demand. Hopes (or fears) of that kind of scenario drove the spike in prices last year. 
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