GoodFuels

Oil prices and economy linked?

In a 2005 paper entitled “Oil and the Macroeconomy“, James Hamilton of the Department of Economics at the University of California, San Diego, drew a parallel between oil prices and economic recession.

“Nine out of ten of the U.S. recessions since World War II were preceded by a spike up in oil prices,” Hamilton begins his paper. He goes on to discuss the complicated economic theory behind why this has occurred.

That was in 2005, before oil hit $148 a barrel. Now we find ourselves in what many are calling the deepest recession in the last 70 years.  The only way we can mitigate the impacts of volatile world oil prices is to use something else, like ethanol.  Every gallon of domestic renewable fuel we use is one less we must obtain from the world market.  3 billion cars will soon be on the world’s roads and competition for fuel will be fierce.  The time to develop renewable alternatives is now, lest we risk continuing this cycle of oil price spikes and economic collapses.

Click here to read Hamilton’s paper.

photo by newbirth

Brazil to challenge US tariff?

Reuters has posted a story this morning in which they report that Brazil has hired lawyers to look into the current US import tariff against Brazilian ethanol.

“Brazil’s Sugar Cane Industry Association hired lawyers to study the compatibility between the U.S. tariff and WTO rules. The collapse of the Doha Round of world trade talks in July made litigation against the United States more likely.

 Amorim said the case could be presented in the next one or two months, depending on final consultations with producers and the government’s lawyers.”

“My reading is that we have a very strong case and so there is a good chance we will challenge,” Reuters reports Foreign Minister Celso Amorim said on Tuesday.

What will this possible litigation mean for the future of the domestic US ethanol industry? Leave your thoughts in the comments.

Read the whole report here.

The Politics of Ethanol

(This was published Friday, August 31, 2008 in The Ethanol Monitor)

As I reviewed the volumes of information we have gathered over the past 18 months, I couldn’t help but wonder how the ethanol industry survived the massive campaign against it and I can only conclude that strong political support has managed to beat back challenge after challenge designed to undermine and slow its evolution.

Now it comes down to two candidates and two parties, a decision which could bolster or weaken the industry for years to come. No matter how you slice it, this election is pivotal for the future of ethanol in the U.S.—and that includes corn-based and next generation fuels.

This is not about endorsing one candidate or another, but rather pointing out the differences between the two, how their visions contrast with respect to energy and America’s future, both from the standpoint of our addiction to oil and how the U.S., the leading polluter on the planet, should be taking the lead in reducing the potential impact of global warming.

In several instances over the past four years I have had the privilege to meet many in the ethanol industry, and when asked why I ever got involved in this field, my answer is always the same. I have been writing about energy of all types for longer than I care to remember. The oil and gas industries fascinated me simply because I quickly recognized the importance these commodities had to the well being and advancement of civilization, but how politically fractious they were and how nations would take up arms to protect their share of these precious resources.

Russia’s sudden invasion into Georgia recently, the latest in the Soviet Union and now Russia’s desire to control the resources of its presumed empire, is just the most recent reminder of how oil and gas power corrupts.

But my answer as to why I ever got involved with ethanol at all goes back to September 11, 2001. That changed everything and brought to the forefront that we could no longer depend on oil to fuel growth.

The single belief should be that the national security threat to dependable oil resources is not acceptable. From corruption in Nigeria to a semi-dictatorship in Venezuela, to Russian resource expansionist policies represent just a few of the challenges the oil dependent world faces in the years ahead. To the U.S., the threat of Islamic extremism centered in the oil capitols of the world may be more publicized, but no more dangerous than the many geopolitical issues that surround what is the thread that holds together the world’s economies.

More than any other reason, ethanol became a necessity, but it wasn’t always that way.

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OPEC Blames Ethanol for Higher Oil

Along with popcorn, beer, chicken feed, every retail food product, movie tickets and just about every thing else in the free market - ethanol is now being blamed for rising oil prices.

The person making that claim is none other than the president of OPEC Chakib Khelil of Algeria. According to MarketWatch, Kheli made that accusation in an interview with with an Algerian newspaper.

The price of petroleum will continue to rise because of ethanol, the weak dollar and political tensions, the oil cartel’s president was quoted as saying Sunday.

Okay - the weak dollar and political tensions makes sense. In fact, he is quoted as saying, “We have to follow the evolution of the dollar, because a 1% fall in the dollar means $4 more on the price of oil.”

However, he “didn’t explain why more ethanol would drive crude prices higher.” Really? Maybe that’s because it has NOTHING to do with it. But, what the heck? Why let the facts get in the way of a good quote that will make a news story?

Flex Fuel Fighting

Author Robert Zubrin has a simple idea for winning the war on terror. Make every car sold in the country flex-fuel.

During his address at the 2008 Fuel Ethanol Workshop, Zubrin made his point by using the analogy of a card game where there is a trump suit that defeats all others and the strategy is for your side to hold most the cards in that trump suit. “It’s the same way in energy,” Zubrin said. “There’s four suits, there’s oil, coal, natural gas and biomass. And right now oil is the trump suit.”

That’s because right now there is mainly one way to power vehicles and that is petroleum products. Zubrin says the key is to change that trump suit and biomass is the best alternative - and the best way to change the suit is by mandating flex-fuel vehicles to give consumers a real choice at the pump. This is essentially the way that Brazil has gone about its transition to an ethanol-fueled economy.

Zubrin’s idea, which is outlined in his book “Energy Victory,” has been gaining some traction and is certainly getting lots of publicity. He is in high demand as a speaker and was selling books by the carton at the FEW. This Saturday, June 28, he will be featured on CSPAN-2’s Book TV.

If you have never heard this guy talk, take 45 minutes and listen to his talk from FEW. It makes so much sense, it’s scary.

The only problem with this idea is that it may be too simple. But, if Congress does ultimately embrace it, I’m sure they will find a way to complicate it.