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Ethanol catches fire after a long lull

|Includes:B, Cosan Limited (CZZ), PBR, XOM

The big players in the oil industry are grabbing ethanol opportunities on the prospect that a weaker dollar and global economic recovery will send crude prices back on the rally trail.

Shell's (RYDAF ) investment in a $12 billion joint venture with Brazilian sugar giant Cosan (CZZ) and its ability to produce fuel from cane is only the first and most prominent step here.

Shell is already selling 2 billion gallons of ethanol a year worldwide, and as the fuel gets traction in established foreign markets and even the United States, even stronger growth is likely to be around the corner.

In the past, the problem has been that as petroleum prices rise to the point where ethanol becomes an attractive alternative, food prices have climbed as well --effectively forcing consumers and producers alike to choose between using agricultural feed stock for human consumption or for fuel.

This time around, BP and Cosan's Brazilian peer Petrobras PBR are likely to be players in the new ethanol economy while other oil majors like ExxonMobil (XOM ) explore alternative biofuel sources.

Meanwhile, the sheer fact that these renewable fuels are fundamentally agricultural products should generate continued interest in fertilizer producers and other companies that support the business of growing commodity wealth from the ground. 

Disclosure: no positions
Stocks: CZZ, B, PBR, XOM