You may think Europe is the last place you should invest.
If you think that, you’re wrong.
The European economy is in a huge hole and there’s only one way to get out of it…
In fact, in the latest Australian Small-Cap Investigator, we argue that some of 2012′s biggest gains could come from Europe. And one industry in particular…
Japan’s Green Energy Lesson for Europe
But before we head back to Europe, let’s make a quick stop in Japan.
This week Japan switched off its last nuclear reactor. Before last year’s earthquake and tsunami, nuclear power accounted for about 15% of Japan’s electricity generation…
Most of the rest was from coal, oil and natural gas (about 70%). Green energy (solar and wind power) made up just 1%…and that’s after a 295% increase from the year before!
The reason we mention Japan is this: it has no natural resources. It doesn’t have coal, oil or natural gas deposits. And there isn’t a uranium mine in sight.
If ever a country needed to secure a domestic energy supply, it’s Japan.
And yet, here’s Masayuki Naoshima, vice president of the Japanese parliament’s upper house telling the Sydney Morning Herald, ‘Australia is one of the most important countries for Japan in terms of natural resources supply.’
What about wind, wave and solar energy?
Not a peep.
Japan is one of the world’s most advanced countries, and it has been for more than 50 years. And yet Japanese boffins and firms still haven’t come up with a home-grown and self-sufficient green energy supply.
Japan realises – and Europe will too – that it needs to look elsewhere…
The European Energy Frontier
While Japan has all but ignored green energy, Europe has thrown billions of euros at it. But our bet is the outcome will be the same – rejection of green energy. Like Japan, Europe will turn back to fossil fuels. In particular, natural gas. Except Europe has one up over Japan.
Where Japan is barren of natural resources, Europe is rich with them. As the Economist noted last November:
‘The old continent has nearly as much technically recoverable shale gas (natural gas trapped in shale formations) as America. Europe’s reserves are 639 trillion cubic feet [tcf], compared with America’s 862 [trillion cubic feet], according to America’s Energy Information Administration…’
Shale gas has transformed US energy supply. Less than 10 years ago the US had an energy crisis. Today, oil giant BP says the US will be energy independent and a net exporter of gas by 2030.
But what about Europe? Right now, it’s going through an energy crisis. Unless it does something, things will only get worse.
A recent report by the European Union highlights the problem facing Europe:
‘The security of the EU’s primary energy supplies may be threatened if a high proportion of imports are concentrated among relatively few partners. Close to four fifths (79.1%) of the EU-27′s imports of natural gas in 2009 came from Russia, Norway or Algeria…’
How is this possible when Europeans have 639 tcf of natural gas right under their feet?
The answer is the Western fad for green energy. The belief that wind and solar power can supply energy to 300 million Europeans.
The truth is that it can’t.
That’s why we’re backing Europe to ditch green energy, and instead drill for the 639 tcf of shale gas under European soil.
Of course, this won’t happen overnight. It will take a long time. But that hasn’t stopped a bunch of entrepreneurial firms having a crack at it now.
And as we see it, even though investing in Europe may seem scary, taking a punt when all seems lost is one of the best ways to snag a high-risk and high-reward return.
This morning, clogging the international headlines are stories on Spanish bank bailouts, Greek debt woes and French elections. All seems lost in Europe.
And that’s exactly why we say that you should take a punt on it now.
Cheers.
Kris.
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