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Everything You Wanted To Know About Ethanol Production But Were Afraid To Ask (ADM, HKI, VSE)

volcan kayar –

The link posted by Faisal Laljee in the comment above yours, quotes the Governments findings and questions its reliability.

Upon nearing completion of extensive research on the ethanol issue I conclude that (corn) ethanol will never replace oil. Even if the 34% energy gain figure is correct (according to my research the figure is closer to 25%) there is no way possible to bring this up to 150+% to start replacing oil.

A quick look at the global oil supply situation will reveal that things are about to get worse before they get better.

DEMAND>>...

Global consumption is increasing. China is only one component. On the unlikely event of a recession in China the Chinese consumption rate will still increase at least 3% per annum.

More realistically, Asia and Eastern Europe combined will consume an additional 2.5 million BPD in 3 to 4 years time!

SUPPLY>>...

Iraq: Most people think that now that Saddam Hussein has been removed that all of a sudden all Iraqis are pro west etc. The reality is that the Badr Brigade and the Iraqi police force are more politically in line with Hamas than with Washington. Sad but true.

Iran: It’s all about global power…
Just a few months ago the Iranian foreign minister declared that his country would never use oil as a weapon. This was great PR as many news agencies concluded that this was a sign that there would not be another 70’s style oil embargo. Lo and behold the Iranians have changed their tune… As the current (nuclear) showdown between the U.S. and Iran proceeds you can bet your bottom dollar that Iran will use oil as a bargaining chip - at the very least - to gain standing. The disingenuous calculating Iranians want partners/allies like…

Venezuela: An unnatural yet compelling ally of Iran. At present the fourth largest crude oil supplier to the U.S. Notice how the supply is gradually shifting away from the U.S. and going more to China. The ‘gradualism’ is a blessing in disguise.

ETHANOL>&gt...

Let’s take a totally hypothetical best case scenario.

1) The U.S. can domestically produce 40% of its oil consumption.
2) The entire production is miraculously transformed into ethanol with a 34% energy gain.
3) The U.S. now has 53.6% of its energy needs.

Obviously a 34% gain is insufficient. One wonders if all the capital being spent on ethanol would better be invested elsewhere. Solar power, hydrogen, windmills and hybrid cars will never make it in time to the finish line. This is why we are pushing ethanol. It is the only available technology that has a chance of making a dent on the looming energy crisis.

Or is it? Whilst researching ethanol I compared several other technologies that are either in development or are readily available. Interestingly enough is the fact that most major rivers in North America have currents that are strong enough to produce electricity efficiently. We are not talking about building dams. The technology entails placing turbines on the riverbed.

In conclusion, corn ethanol is an immediate ‘band aid’ technology with a limited life span. In the interim it is going to make money until more economically viable technologies take over. How long you ask? Probably for 5 to 10 years after the upcoming energy crunch.

I suspect that the entire ethanol episode is more in line with the Strategic Reserves scenario. Neither solve the energy problem yet both send a clear message that the United States will not be held hostage by energy suppliers.

Disclosure: This comment was written by a CrossProfit analyst. This is a personal opinion and may not reflect the opinion of CrossProfit.com.