When oil prices rise, public interest in alternative energy often does too. Tapping into renewable sources of power like wind, solar power and hydrogen, which are inexhaustible but far from inexpensive, seems to make more commercial sense when crude oil costs almost US$48 a barrel.
But the logic is evidently escaping Wall Street. Many companies involved in alternative energy have missed out on the rally that has lifted shares of oil and gas companies.
Some investors, particularly advocates of what is known as socially responsible investing, expect the cost gap to narrow. They say that producing energy from renewable sources is becoming cheaper, while fossil fuels will become more expensive as supplies dwindle, long after the current pressures that have been pushing prices higher have receded.
Those advocates also say that concerns about pollution and climate change make alternative energy more politically palatable than energy from conventional sources. In many countries, they say, that should help producers benefit from government subsidies and ambitious production targets.
But skeptics closer to the investment mainstream argue that renewable energy will not become commercially viable for many years. In the meantime, they warn, these industries will have to depend on continual new financing and, as a result, are best avoided.
"The overriding issue is that the economics have to work, and for many companies that hasn't been the case," said Wenhua Zhang, an analyst at T. Rowe Price in Baltimore. "These are capital-intensive industries. There are very few of them where you don't have to spend a lot of money."
Alternative energy sources typically require huge infrastructure investment to deliver power to electricity grids, or to cars in the case of hydrogen as a substitute for gasoline.
"Energy is not like other technologies, where you can get started for US$15 million," Zhang said, referring to the dot-coms that proliferated in the late 1990s. "You need half a billion."
Portfolio managers and small investors may be reluctant to dip into their pockets when any payoff may be years away, but some big-name industrial companies that can afford to be patient have been making significant investments in alternative energy. Ford Motor and DaimlerChrysler recently agreed to acquire part of the vehicular fuel-cell business of Ballard Power Systems.
General Electric is one of the world's largest producers of wind turbines and is heavily involved in solar power, too, as are the Japanese companies Matsushita Electric Industrial and Kyocera and the oil producers Royal Dutch/Shell and BP.
"GE is likely to become the largest alternative energy company in the world in a short time," said James Cameron, a founding partner of Climate Change Capital, a venture capital firm in London that specializes in alternative energy. The investments by GE and other multinational companies "are signs that the industry is about to grow up," Cameron said.
He added that pressure on pension plans to invest in socially acceptable ways would bring more money to the sector.
For now, though, many investors remain reluctant to commit capital to companies that will not show profits for a long time, if ever. Yet Charlie Thomas, a manager of environmental funds at Jupiter Asset Management in London, pointed out that some makers of wind turbines were already in the black, including two of his favorites, Vestas Wind Systems of Denmark and Gamesa of Spain.