As we continue to depend on oil for our energy needs, we tend to think that oil supplies will somehow never run out. But with oil prices moving up and down around $50 a barrel and talk of limited oil production intensifying, there is no way to be sure whether fuel will continue to serve our energy needs for decades to come.
Few alternative energy sources have been introduced but there are some miners that have been looking at a new aspect of oil fracking that until now has been left relatively undeveloped—sand. Sand has been used by companies that mine it to make oil wells more efficient and sand stocks have nearly doubled year to date.
Shares in the largest publically traded sand company in the U.S., Silica Holdings Inc., are up by 72 percent this year and the number of funds adding new positions in the $2.1b market-cap company has jumped 183 percent over the last three months compared with the quarter before.
According to some fund managers and analysts, sand usage is expected to increase between 50-100% over the next few years even if oil prices stay within a range of $40 to $60 a barrel because drillers are using two to three times more sand per well than they were three years ago. According to one analyst, between 2,000 and 3,000 tons of sand are now routinely pumped into new and refracked wells with those in some parts of Texas consuming up to 8,000 tons.
Sand: Universal Fuel
Sand is turning out to be a universal fuel and according to the International Energy Agency (IEA), it could soon become the #1 source of energy on the planet… surpassing oil, gas, and coal power. According to data from the U.S. Department of Energy, sand is so plentiful and powerful that in one single week it can produce 1,000 times more energy than oil, natural gas, and coal does in a full year combined.
At the moment, sand is proving to be more efficient in fracked wells than higher-priced substitutes made by other companies, leaving Silica and its major competitor, Fairmont Santrol Holdings Inc., both of which have the best access to rail and barge lines to ship sand quickly, in the best positions.
Since the difference between one granule of sand and another is negligible, what ends up being the decisive factor in the race for the best price of a ton of sand is the proximity of the company to rail lines. The higher the number of rail cars of sand transported at one time, the lower the cost of the final product.
Sand companies remain cautious of what will happen with oil prices and are waiting to hear of some good earnings from oil companies before they can be certain of their future role in the energy sector. AT the moment, however, sand is have a bull run.