It's hard to believe that only a few years ago, crude oil traded under $20 per barrel and the average price of a gallon of gas was around $1.00. Back then, it sure seemed as though the world had no energy problems -- there was plenty of cheap oil, natural gas, and coal.

But what a difference a few years can make. For the first time in history, most Americans paid more than $3.00 per gallon for gasoline and a barrel of crude went over $70. And with natural gas prices spiking to more than $12 per million cubic feet, you know consumers felt the pinch of higher energy prices.

The simple fact is that the global economy is built on fossil fuels -- chiefly oil, natural gas, and coal. As a result of this dependence, high energy prices spell major trouble, as they make it more expensive for consumers to drive their cars, run their air conditioners, etc. These higher costs, in turn, reduce consumer spending power -- an extremely important effect when you consider that consumer spending accounts for two-thirds of the U.S. economy. Meanwhile, the high cost of electricity and gasoline also hits businesses -- after all, it costs money to run a factory or to keep the lights on in an office building.

And high prices aren't the only reason to be concerned about the world's dependence on fossil fuels. Another risk is geopolitical. Specifically, oil and natural gas production in major energy consuming regions such as the U.S., China, and Europe isn't keeping up with demand. Increasingly, these countries will be forced to rely on imports, and those imports will come mainly from the Middle East -- one of the world's most politically unstable regions.

And finally, we've yet to touch on the detrimental impact that the world's use of fossil fuels has had on the global environment. Global warming, holes in the ozone layer, air and water pollution -- these are just a handful of the negative effects that fossil fuels have had on the world's most precious resource of all -- our environment.

The Search is On for Alternative Energy Sources
With all of this as a backdrop, it should come as little surprise that the search is on for efficient, cost effective alternative energy sources that can break, or at least moderate, the world's addiction to fossil fuels. Some forms of alternative energy are already being harnessed around the world today. Wind turbines and solar cells are widely deployed in the U.S. and Europe, and some countries are experimenting with even more innovative power technologies. For example, Britain is working on prototype power plants powered by the breaking of waves near the seashore.

And even our everyday trash is being harnessed for power. Bits of wood, paper, and organic matter that accumulate at landfills can be burned to produce energy -- so-called "biomass power" is already being used in California. And decomposing garbage also gives off methane gas. Since natural gas is more than 99% methane, some researchers are hoping to harvest and use this gas to produce power.

Of course, a new generation of even more advanced alternative technologies is also on the horizon. Fuel cells, for example, harness a chemical reaction between hydrogen and oxygen to produce energy efficiently. Better still, the only waste product produced by a fuel cell is water; burning fossil fuels, in contrast, releases several different classes of harmful pollutants into the atmosphere.

And researchers are also working on advanced batteries to more efficiently store power. Before electric cars and buses can be widely deployed, batteries will need to be lighter and longer lasting than they are today.

Government Assistance
Of course, governments haven't ignored the potential promise of alternative energy. The new U.S. Energy Bill, for example, provides billions in tax breaks and other subsidies in an effort to spur the development of alternative and renewable energies. Germany and Holland, among other nations, have been very aggressive in subsidizing research on harnessing wind to generate electricity and other unconventional forms of power generation.

And according to the U.S. Energy Information Administration, all of that research and development is likely to start paying off. The agency is projecting an increasingly important role for alternative energies in the U.S. power grid -- a more than doubling of electricity produced using alternative technologies between 2003 and 2025.

All of this government investment in renewable energy has led to enormous benefits for companies that are manufacturing alternative energy technologies such as wind turbines. Meanwhile, the companies doing the R&D work on even more advanced alternative energies are also getting their fair share of the government's largesse. Even better, you can bet that high energy prices will be a very effective incentive in encouraging more private investment in alternatives to fossil fuels.

In the table below, we offer a list of some of today's most promising publicly traded alternative energy companies. It's important to note that many such technologies are still in the development stage or at least are in the very early stages of adoption. Therefore, this list is designed only to educate you about the important players in the alternative energy industry. 

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