Southern Company CEO Tom Fanning offers some interesting perspectives on long term energy solutions. He believes that Natural Gas consumption will rise by 50% and over the long term this will likely lead to price increases that might make coal viable once again. In addition there is the risk the environmental concerns over “fracking” could prohibit its use leading to declining supply growth in natural gas. He makes a good point when he talks about making 30 year investments when putting a plant into the ground so it is important not to look at just short term pricing to determine strategy. I’d be alarmed as a shareholder that the CEO is concerning himself with beta however, as that is an odd notion for a CEO to be trying to reduce the stock’s beta when running a company. I’m not very optimistic on coal but I think we would be silly not to realize that it is still likely going to be a significant energy resource moving forward. I’m all in favor of focusing on natural gas utilization as much as possible because it is better for the environment and it makes economic sense. What we need to avoid however are non-economic subsidization of ethanol and solar. Eventually these energy sources might make economic sense but until it does our government is not in a position to fund money losing ventures when there are more practical alternatives.
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