With the price of oil hovering around $120 a barrel, there is talk coming from seemingly every direction proclaiming that we need to find an alternative to oil, but talk and reality are two different things. So on what can we hang our hopes?

There are several alternative energy sources out there, but most of them have little to no chance of becoming our long term solution. The one the White House has been backing is ethanol, but recent studies and food prices have shown the vast weaknesses with it. So we know for sure that ethanol (at least the food-based version) is out, but what else do we have?

There is a lot of talk about hydrogen, clean coal, natural gas, nuclear and even non-traditional oil sources, but alas all of them have major weaknesses. There appears to be no perfect solution to our oil dependence. Among these alternatives, to my mind the best solution involves a heavy dose of nuclear energy, but the cost and time frames involved can be prohibitive.

The idea of nuclear power itself is great, but what about all the radioactive waste produced by the plants and the major security risks involved? These are a couple of the big questions brought up by nuclear power opposition, and until recently there really wasn’t a good answer. Not too long ago I came across a company that is working towards implementing thorium in place of uranium in nuclear reactors. This is an interesting development because the byproduct of a thorium based reactor cannot be used to build a nuclear bomb (always a good thing), and the half life is a fraction of its uranium counterpart. This technology is fairly new, but if it works it could potentially solve a couple of the major concerns brought up by those opposed to nuclear power.

The thing to keep in mind here is that there is no perfect solution. We are going to be dependent on oil for some time yet, but the longer we take to address our oil problem, the worse off we are going to be. President Bush recently said “I think we better understand that there's not a lot of excess capacity in this world right now," According to Reuters. The demand for oil is increasing at a much faster pace than the supply, so according to economic theory the price of oil probably won’t be coming down anytime soon. If we don’t look for the best solution, one will be forced upon us eventually.

This problem is real in my mind, and as an investor I’m of course trying to figure out what the solution will be and how to profit from it. The best solution I see long term is with nuclear energy; what do you see? I’m curious to hear what others are thinking, so if you think you know what the solution to our oil problem will be, fill us in.