JBL: Defending Ethanol

When pundits talk about the lower miles per gallon in ethanol they are correct. However it is E85 they are talking about, and either through ignorance or carelessness they imply that these numbers apply the same to the more prevalent blend of 10%.

Summer driving season is upon us and when it is finished ethanol prices will retreat as demand decreases and supply increases.

If we went to a 10% to 15% ethanol blend in every gallon of gasoline, we would reduce our foreign oil dependency by roughly 20% to 30%. That would be enough extra fuel to tell Iran and/or Venezuela that we choose not to do business with them. That to me is huge.

Ethanol has to be trucked because it is too corrosive to be shipped in pipelines. So the key to investing in ethanol is knowing your market, because much more supply is coming online. California and New York consume almost 25% of the nationÂ’s ethanol, yet more than 90% of the ethannol is produced in the corn belt.

Invest in companies that produce ethanol on the two coasts such as Xethanol and Pacific Ethanol . There is obviously a huge demand for companies that produce ethanol in the Midwest such as Verasun , Archer Daniels Midland , Aventine, and Hawkeye. But I believe this is where it will be tough sledding due to so much capacity coming online in the next few years.

Now on to another renewable that is helping America reduce its dependence on foreign energy.

Wind-generated electricity reached an inflection point last year when for the first time it became cheaper than electricity produced by coal and natural gas. Wind energy will become even cheaper over time; the opposite is true for coal- and natural gas-produced energy.