Ethanol, is it the hope of the future. Sources say no!! The hype might be a little overripe. Ethanol, touted by Bush and your local politicians is the next best thing to save the country from skyrocketing gas prices. Yes, and you've often heard my opinion on the subject...I'm torn between crying at the pump and smiling in my stock portfolio account because I've owned a number of different oil companies.
Don't believe the Hype
Yep you heard it here, ethanol will not be the wave of the future to save us from the huge energy crunch here in America. There are countless problems that are leading to high prices at the pump. The first is simply SUPPLY and DEMAND. The fact of the matter is (I'm included) that Americans are not great at conserving...simply put we're wasteful. Just live saving for a rainy day, Americans are poor at saving money and conserving energy. The boom of the SUV proved that bigger is definitely better. But I forgot to mention the one area where we don't have control over is the Supply piece. Yep, you guessed the majority of the world's oil is controlled by foreign countries. And I can almost safely say that there is a lukewarm reception about American from most of these countries. It is usually to be a love hate relationship with most of these countries. Countries like Saudi Arabia, Iran, Iraq, Nigeria, Venezuela are big players but smaller countries are continuing to make a lot of noise. Both sides have always needed each other, America supplies the thirsty demand and the oil countries SUPPLY the oil whether we like them or not...its okay to say money talk. But what has changed about this scenario...leverage. The oil companies benefit from changing global situations such as Iran and Venezuela speaking out against American at a time where America is preoccupied with bigger issues. The other is the surprising growth of BRIC. That would be Brazil, Russia, India, and China. Again students the growth of these countries has fueled the global DEMAND for oil. And because oil is a beautiful natural resource it has a finite supply. There has even been talk that Saudi Arabia's oil supply has been overstated. And unfortunately for the rest of the world the Saudi's do a great job of keeping numbers like that secret. So a finite resource with increasing DEMAND brings us to where we are at today...Expensive oil. And our policies continue to put us in a bind because countries like China continue to ink deals with countries like Saudi Arabia, Venezuela, and the Sudan to shore up their countries need for the depleting resource.
That brings us finally to ETHANOL. The resource to save the day, maybe not. One of the biggest problems is that if America used 100% of the corn it produces for energy consumption for car, it would still only be able to supply the demand for 7% of the vehicles. To completely rely on ethanol as a source for energy, America would have to use 93% of its land for corn production...not possible. The last piece that I will mention that has been debated is the long term viability of ethanol production. Flat out...its takes more energy to produce say a gallon ethanol than is actually used from that gallon. Food for thought
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