By Keith Fitz-Gerald
Contributing Editor
For months we've heard nothing but great things about ethanol.
And true to form, the experts here at Money Morning have ignored most of the resultant investor buzz.
The truth is that ethanol's a farce and we're our own worst enemy when it comes to refining the technology anyway - literally.
For one thing, ethanol - in its current state - is anything but the road to energy independence. Sure it can help out, but even if we were to convert 100% of available corn crops to ethanol production, our gasoline dependence would drop a mere 12%.
In order to get some serious leverage, and truly displace gasoline in this country, we'd need 120% of all available cropland - meaning we'd give up planting anything else. No beans, no fruits, no potatoes ... you get the idea.
Here's another fact most folks riding the ethanol bandwagon seem not to know: Because the U.S. government required oil refineries to use more than 4 billion gallons of ethanol last year - regardless of how much it actually cost - wholesale prices were more than double the cost of conventional gasoline. And that doesn't even include the costs of delivering the ethanol, which boosted its "real" price even more.
That leads us to gasoline prices at the pump, which include federally mandated subsidy taxes in designated "clean air" areas that boost the price by 60 cents or more per gallon.
As a taxpayer and free-market advocate, I'm hopping mad, because what's really at stake here is the trillion-dollar "porkfest" laid out by the Beltway Boys [in my view, they deserve to referred to as "The Beltway Bandits"]. It's just one more example of badly squandered capital - money that could have done some real good if spent correctly, but is instead wasted to support yet another technology with dubious prospects.
In all fairness to ethanol proponents, marked improvements in the refining process that are not yet commercially marketable could conceivably transform ethanol into a profitable product. Were that to happen, U.S. consumers and commercial interests would obviously use more of the new fuel.
But that brings us to the second problem. And that problem is...well...us.
As it turns out, most people in the U.S. Corn Belt love the idea of growing more corn, but they'd rather not have an ethanol distillery in their own back yard.
Unfortunately, in the world of alternative energy, that "I support it, so long as you put it somewhere else" is a common sentiment across much of the U.S. market right now. It doesn't matter what form of alternative energy you're talking about - either solar farms, with angled solar panels arranged like crops in furrow-like rows, or sprawling wind farms, each with a battalion of windmill towers, their propellers spinning at a hypnotic pace - communities want them built elsewhere.
People are resisting wind farms in the gorges here in Oregon. Along the coasts, citizens are resisting liquid-natural-gas (LNG) facilities. Many can't agree on independent power production sites. And they sure can't get it together for the biggest boy on the block, nuclear power.
Seems we're our own worst enemy.
Guess we better bank on doing business with the OPEC folks (Organization of Petroleum Exporting Countries) awhile longer and continue pouring our hard-earned tax dollars down the garbage disposal so that Congress can continue to finance its trillion-dollar pork-fests.
It's a shame. This doesn't happen in other countries, which have sound energy policies. It's yet one more reason why the U.S. economy will continue to fall even further behind the rest of the world, since low-cost power and energy are one of the best economic-development tools around.
Let's hope that we wise up, before we fall too far off the pace.
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About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.