"Ethanol, Shmethanol"

CLEARLY, the market does not think much of ethanol. After all, if the President’s proposal on substitutes for gasoline and other transportation fuels had even a small chance of becoming a reality, the price of Oil should be falling precipitously right now.

After all, President Bush wants America to use 20% less gasoline in 10 years, and;

“The European Union on Wednesday announced plans to lower energy consumption, develop renewable sources such as wind power and biofuels and increase research into cutting carbon emissions from fuels already in use, particularly coal. The ambitious proposals seek to deter growing dependence on oil and gas imports and curb the emissions blamed for climate change….

The EU is proposing that 20% of all its energy should come from renewable power by 2020, and a tenth of vehicle fuel from biofuels. It calls for greenhouse gas emissions to be cut by at least 20% below 1990 levels by 2020 to limit global warming and prevent serious damage caused by climate change.”
USA Today 1.10.07

So, here we have the 2 biggest consumers of petroleum on the planet telling the market that they intend to cut their usage of the commodity SIGNIFICANTLY… shouldn’t the price of this commodity be crashing? If the U.S. and the E.U. were successful, all else being equal, wouldn’t petroleum be overflowing the inventory infrastructure at some point in the near future? Wouldn’t the market be terrified of this? Why is the price of oil up 8% since the President’s speech? What gives?

I’ll tell you what gives. The market knows better. Bio fuels simply do not scale. Bio fuels are barely energy positive (when ethanol plants start to run on ethanol instead of oil, and natural gas and electric derived from coal you will know that ethanol is energy positive). Further, we cannot change our car and truck fleet mileage efficiency average in time. For better or worse, when it comes to transportation fuels, petroleum is the only game in town.

The U.S. will be using 20% less gasoline in 2017 (give or take) no matter what we do, no matter who gets blamed, no matter who we invade, no matter who the government indicts.


Mentatt (at) yahoo (dot) com