The surge in oil prices over the past week should ultimately prove a tailwind for nuclear power, a stable, carbon-free energy source whose fuel costs are far less volatile than oil or natural gas. When fossil fuel prices spike, utilities and policymakers tend to seek alternatives that offer predictable and stable power costs, a profile that nuclear fits well. Once built, nuclear reactors can operate for decades with relatively low and stable fuel costs, making them an attractive option compared with oil or gas-fired generation during periods of energy market volatility.
The nuclear story is also gaining momentum from a powerful structural trend: surging electricity demand driven by artificial intelligence infrastructure. Large data centres require vast amounts of reliable, around-the-clock power, pushing technology companies and utilities to explore long-term energy solutions capable of meeting that demand. The evolution to nuclear power is a slow one, with a small modular reactor (SMR) typically taking about 3 to 5 years to build once major licensing, site work and financing are in place. The appeal of SMRs is that they are designed for factory fabrication and modular assembly, which is intended to shorten construction compared with large conventional nuclear plants.
The World Nuclear Association’s 2025 reference case sees uranium demand rising to ~390Mlb by 2040, incorporating known projects and depletion from existing mines. Current modelling points to a structural deficit that widens materially next decade, with the market potentially short more than 200Mlb by 2040 unless meaningful new supply emerges. These looming shortages could become the rate limiter for nuclear growth, implying significantly higher uranium prices over time. In our view, the uranium market is in the early stages of a “Super-cycle”, and we expect to see prices increase towards the $US150-$200/lb before reverting to a long-term sustainable price well in excess of $US100/lb next decade.
- We believe nuclear power is the future, but it obviously doesn’t feel like it domestically.
