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The Rise of Ethanol

By: Steve Johnson

2/13/2008 - 35 Comments

With oil reaching $100/barrel and headed to $150-$200/barrel in the next few years, the growing use of Ethanol will continue for some time. 

There are so many things happening in the market that are in favor of Ethanol that the production is guaranteed to grow over the next several years.  Ethanol is produced from anything that grows, and more so with plants that have a high sugar content - like Sugarcane and Corn.

The energy needs in the US are not electrical power.  We have enough coal to supply electricity for hundreds of years. The debates about geothermal, nuclear and wind power are primarily about reducing the CO2 gas to help the environment.  This is an important discussion, but the bigger problem we face today in the rising cost of oil.

Liquid Fuels

The US dependency on liquid fuels (oil) to power cars, trucks, trains, ships, and airplanes is a geopolitical issue that is bankrupting the country at a rate of $60 billion/month in the trade deficit. The problems of Ethanol are quickly diminishing as the problems of oil are mounting.  The large oil producing nations are decreasing their supply, while China and India are rapidly industrializing, and within a decade or two plan to double or triple the number of cars in the world – which will drastically increase the demand for oil.  The dropping value of the dollar, which is the currency of oil, is also having a drastic impact of the price of oil – sending it over $100/barrel last month.

Reference Article: Expensive Gas Everywhere

The Critics

The critics argue that Ethanol costs more to product, uses lots of fresh water and is driving up food costs. These arguments have all been reduced; as new startups are making Ethanol for under $1/gallon without corn and have reduce the use of fresh water from 5 gallons to 1 gallons per gallon of Ethanol.

Reference Article: Startup Says It Can Make Ethanol for $1 a Gallon, and Without Corn

Reference Article: Anti-Ethanol Myths, Misinformation 

The rise of Corn prices, do have some impact on foods in which corn is an ingredient.  But energy prices, spiking to $100 per barrel have a much more dramatic impact on food prices because all foods are dependent upon oil for processing, packaging and transportation.

Reference Article:  Is it true that ethanol is driving up prices at the grocery store?


The 2006 production of Ethanol represented only about 2.5 percent of the total US vehicle consumption of 131 billion gallons of gasoline. Ethanol production can grow for ten years and create a lot of jobs, between farm and factory.  Brazil has enbraced the Ethanol economy and now provides the nation with 1.8 million jobs, which is about 2 percent of their entire workforce.  JOBS are getting harder to find as the US slips into a recession. It makes a lot more sense to create jobs for us then jobs for terrorist nations like Saudi Arabia and Iran. The Ethanol industry is emerging as a new growth market. Now would be a good time to invest in or get a job in this industry.

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