I fully admit I fell for it…
Back in 2005, smitten by the promise of cleaner transportation fuels and the ability to displace foreign oil, the ethanol industry had me in its trance.
And of course, the investment opportunities were overwhelming.
From early ethanol all-stars like Pacific Ethanol (NASDAQ: PEIX) to the Big Ag companies that were making a fortune in anticipation of record corn expansion, we all made a pretty penny back then.
But behind the backdrop of some very profitable plays, I was most excited about this amazing opportunity for the world to produce a cleaner, more sustainable fuel.
Unfortunately, things didn’t really turn out that way…
Ethanol Can’t Get a Break
Not long after the ethanol craze kicked in, the Union of Concerned Scientists released a report that analyzed the complete lifecycle emissions of ethanol.
The results did not sit well with those seeking a more sustainable and fiscally-responsible transportation fuel.
According to the report, greenhouse gas reduction claims were a bit overblown as such reductions did not account for things like fossil fuel inputs, processing and distilling, and fertilizer production.
I tell ya, after that report, environmentalists gave the ethanol industry about as much love as the mainstream media gives Ron Paul.
But the Union of Concerned Scientists’ report was just the beginning…
Over the past five or six years, we’ve seen one damning report after the next. And they haven’t slowed down, either.
In fact just last week, a new study found that the environmental impact of corn-ethanol E85 is 23 percent to 33 percent higher than gasoline.
Corn-based ethanol worse than gasoline?
Could that be possible?
Well, according to the authors of this new study — which was just published in the journal Environmental Science & Technology — E85’s severe impacts on eutrophication, water use, and land occupation outweigh the modest benefits in things like climate change, ecological toxicity, and fossil energy consumption.
Ouch!
Of course, remember that we’re talking about corn-based ethanol here…
Corn isn’t the most economically or environmentally sustainable feedstock, especially since we already subsidize the hell out of the stuff.
But there are some worthwhile biofuel developments on the horizon.
Certainly there’s a lot of promise for algae, although we’re still probably a good seven or eight years away from seeing any kind of real, significant commercial production levels for use outside of the military.
Worth noting: Last year, the U.S. Navy successfully tested 20,000 gallons of algae biofuel on a decommissioned destroyer. This trial run was part of the Navy’s goal of having 50 percent of its entire fleet running on alternative fuels by 2016.
Outside of the military, I think it’ll be a while before we see algae-based biofuels really have much of a commercial presence — especially with so much momentum now building around natural gas as a transportation fuel.
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Better Solutions
If you’re a regular reader of these pages, you know I’m quite bullish on natural gas as a transportation fuel.
Particularly for trucks and buses, the economics just make too much sense.
Dirt-cheap natural gas, higher gasoline and diesel prices… it’s a perfect storm.
And every investor with skin in this game is making a fortune.
Hell, even the Chinese are sinking their claws into this one, securing as many North American natural gas deposits as they can.
In fact, just last year China and a few other Asian countries secured nearly every last cubic foot from one of the largest natural gas deposits on earth. We’re talking about a total score of about 500 trillion cubic feet — right here in North America.
My friends, this is more than enough gas to power the entire United States for five years straight.
And while the Chinese own most of it, you and I can certainly wet our beaks on this one…
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Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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