What would you do with up to $3 billion in uranium?

The United States isn't exactly a growing uranium market - with no new commercial nuclear reactors constructed in thirty years - so when the federal government scooped up excess uranium at $10/pound over the years, it seemed a decent investment. Now that uranium is worth 12 times the price - $120/pound - and one private company wants the federal government to give them the uranium for free.

What?

Okay, so it's not so simple as that. The company USEC, is operating the only uranium processing plant in the United States, originally constructed during the Manhattan Project and running on technology of that period. This company is also developing new processing technology that the U.S. government would receive royalties for. But they also don't seem to need a handout:

Fourth-quarter net earnings climbed 35% to $40.1 million.

And in 2003, the union workers at the USEC plant were on strike due to these grievances:

--- Use of contract workers without security clearances who are performing routine maintenance; --- Management and replacement workers lacking compulsory safety training; --- Inaccurate schematic diagrams for the plant's electrical and steam systems that make routine maintenance dangerous when performed by contract employees unfamiliar with the plant; --- Management personnel experiencing fatigue from having to work as many 12 hours per day, six days per week on reduced crews; and --- Potential problems arising out of the transfer and shipping of radioactive materials.

The company is also playing the nationalism card, as a European enrichment company has plans to construct an enrichment facility in the U.S. Interestingly, the challenger is noted for being a lot more efficient and experienced than USEC. So is a uranium gift a way to boost American industry or something like subsidized the H3 against the Toyota Prius, all in the name of America?

Uranium prices: a short half-life?

As I mentioned in my post on Iran's energy crisis, interest in nuclear power is unlikely to save Iranians or Americans from rising fossil fuel demand and prices or global warming. The ninefold jump in uranium prices since 2002 is leading to gold-rush-like interest in uranium mining, as folks seek to lay claim to an increasingly valuable resource.

The source of the high prices is tightening supplies. For years, decommissioned nuclear weapons in the United States and Russia flooded the market with cheap uranium fuel for power plants. But as that market dried up in 2003 and demand has risen in other locales, uranium prices have jumped.

The big question is whether the speculators really have a solid market. In addition to the very large concern over nuclear waste storage and NIMBY, nuclear power plants aren't as economically competitive with fossil fuel power. Granted, a carbon tax could substantially change the economics - if it was at least $100/ton - but although climate change is on the political map, there's little indication that a step that significant is coming.

Iran: energy policy isn't easy in an Islamist state, either

Energy policy to address global warming, technology, and higher gas prices isn't just the problem of the United States, although President Bush's meeting with the Big 3 automakers today suggests we have a long way to go (no, the proposed 4% per year increase in fuel efficiency standards was not discussed).

Iran's conflict with the United States and other Western powers also has to do with energy - primarily, the Iranians' dramatically increasing energy use. Demand for electricity and gasoline has been rising at double digit rates as government subsidies reduce any market pressure to conserve.

Image from the Wall Street Journal Story

Demand for electricity is rising along with the rest, as Iranians avail themselves of cheap imports of basic consumer goods from China - TVs, refrigerators, and air conditioning (with summer highs exceeding 110 F, I can understand why). Thus, Iran wants to develop nuclear energy since its fossil reserves clearly can't keep pace.

Ironically, Iran's energy crisis is a problem of political will. In addition to subsidizing gasoline to reduce prices to $0.40 per gallon, oil-exporter Iran has to import gasoline to meet this subsidized demand. With $7 billion spent on gasoline imports last year - Iran lacks sufficient refining capacity for its crude oil - and $9 billion projected this year, they know consumption must be curtailed. But in a country with one all-powerful Supreme Leader (See: Iranian government structure), cutting subsidies is apparently as hard as cutting Congressional pork projects in the United States.

This time, President Mahmoud Ahmadinejad says the government is serious about cutting back consumption, though he acknowledged recently it's politically impossible to get rid of subsidies and raise pump prices the 40% to 50% that would require anytime soon. (emphasis mine)

And we thought leaders of democratic countries had it rough.

The final irony in the Iranian energy debacle is that the brinkmanship with the West might not be the economic hope they envision (although if it's nukes they want, they may not care). Uranium prices have increased ninefold since 2002 as demand for carbon-free energy has rejuvenated interest in nuclear power. In other words, there's no cheap solution to the energy crisis, whether it's more expensive nuclear power for Iran or carbon taxes in the United States.

Blowing a hole in the world's nuclear non-proliferation regime

Several weeks ago, the Bush administration proudly announced a deal to offer civilian nuclear assistance to India. While the aid itself is unremarkable, it is precedent-setting because until now, a country had to renounce nuclear weapons in order to receive civilian technological assistance and materials. No more.

The US is the first nuclear-powered nation to open the door to proliferation by signing a deal with India allowing the transference of nuclear technology. While the President has indicated that some safeguards will be in place, the Economist notes that there's no real way to keep the technology from being co-opted into India's active nuclear weapons program. In particular, India's shortage of high-grade uranium for bomb-making might be a problem of the past, as they would be able to divert uranium intended for civilian use into bombs.

I can't see how this is a good move in a region where two nuclear powers (Pakistan and India) are regularly practicing brinkmanship.