Oils' Well? the Prospects for Biofuel Stocks

By Fried, Rona | E Magazine, January-February 2007 | Go to article overview

Oils' Well? the Prospects for Biofuel Stocks


Fried, Rona, E Magazine


Henry Ford had the right idea when he designed the Model T--it was a flex-fuel vehicle that could run on gasoline or ethanol. Today, biofuels are not a simple substitute for fossil energy--we don't have enough farm land, for one thing--but they can certainly be combined with other fuels in a diverse energy portfolio.

Proponents have been pushing biofuels into the American consciousness for years, but it took rocketing gas prices and the unstable Mideast to create a corn rush. Over the past year, biofuels have come into their own, riding on the promise that they can help wean us from foreign oil, boost our rural economy and lower greenhouse gas emissions.

Farmers, agriculture conglomerates and investors have all made serious commitments to biofuels. Some 44 ethanol plants are under construction, bringing the national total to more than 1,000.

Bio Trading

Since March 2006, more than 40 biofuel companies have been listed on the world's public markets. Six countries have policies in place to promote biofuels and another dozen are developing them. The European Union wants biofuels to make up 5.75 percent of transport fuels by 2010, and 20 percent by 2020.

Unlike such renewable energy sources as solar and wind, biofuels compete directly with fossil fuels in transportation, which uses 60 percent of our oil. They can be distributed through our current transportation infrastructure and used in conventional engines. The fuel is biodegradable, lowers greenhouse gas emissions and improves engine lubrication. The price is competitive with gasoline when oil is at $45 per barrel or above.

Ethanol Challenges

The U.S. is the world's second-largest producer of ethanol, which it derives from corn. Unfortunately, much of the U.S. corn crop is already pledged to food production. Currently, about 14 percent of the corn crop is used to make ethanol, which is three percent of the nation's fuel supply.

And questions remain. Since most corn and soy for fuel is produced the cheapest possible way--in genetically modified monocultures, grown with petroleum-based fertilizers and lots of pesticides--what are the ramifications for soil erosion, air and water pollution? And what about ethanol plants powered with dirty coal energy?

Some observers see promise in "cellulosic" ethanol, which uses agricultural wastes and other plant matter as its "feedstock." The production process to convert this cellulosic waste is more expensive, but a pilot plant is up and running in Canada and others are on the way. …

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