Uranium price hike

OECD Observer

Source: The Ux Consulting Company, LLC, UxC.com.

Oil prices have been spiking, but so have prices of other energy sources, like uranium, the fuel for nuclear energy. Overproduction in the 1980s caused uranium prices to fall and by 1994 they had reached their lowest level in 20 years.

Exploration and production were all cut back, squeezing supply. Prices then firmed a little, though they turned down again until 2001 when they reached historic lows. Since then, prices have taken off, leaping to levels not seen since the 1980s. By the end of 2004, they had risen by almost 200%.

Unlike for oil, the causes can be tied mainly to the supply side, and to adjustments within the industry. The OECD Nuclear Energy Agency (NEA) cites a mix of reasons. For instance, in October 2001 a fire destroyed the solvent extraction facility at the Olympic Dam mine in Australia, one of the world’s main producers, while flooding temporarily halted output in the McArthur River mine in Canada in 2003. There were also defence-related uncertainties affecting price, in particular about the availability and timing of low-enriched uranium derived from weapons material. The weakness in the US dollar has also been a factor.

Unlike for coal, oil and gas, the impact on final prices of nuclear energy is very limited because fuel costs account for only 5% of the production cost. Nonetheless, the price picture could change as demand rises.

©OECD Observer No 249, May 2005

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