‘Suddenly and silently, the world’s
demand for ethanol is about to explode’
Money and Markets
Last week was the worst for the Dow Jones Industrials in over four years, and I think it’s too soon to expect a turnaround.
Quite to the contrary, this is the signal to reduce your risk, build your cash and search elsewhere for new opportunities.
In fact, in just three days, Air Force One will touch down at Brasilia’s Juscelino Kubitschek airport ... President Bush will sign a land-breaking ethanol deal with President Lula ... and the ethanol profit explosion I’ve been writing you about will be off the launch pad.
For most investors, this is
coming as a huge surprise: Few believed the administration would defy the
corn-based ethanol producers in the
But for anyone who’s been reading our Money and Markets, it’s the natural, obvious, inevitable outcome of quiet — but dramatic — events we’ve been bringing to your attention week after week.
Just two weeks ago, for
example, on our live global teleconference, Joseph Weiss, on the scene in
He told you that U.S. State
Department officials were in
Were you listening? I hope so. Because this past Friday, the big news broke in New York: On the front page of Saturday’s New York Times, under the headline “U.S. and Brazil Seek to Promote Ethanol in West,” reporters Edmund L. Andrews and Larry Rohter, wrote ...
“The agreement could lead to
substantial growth in the ethanol industry in
“Much of the ethanol produced
there is made from sugar cane and is far cheaper to produce than the corn-based
ethanol that has been nurtured by protective tariffs and government mandates in
“By increasing ethanol production and consumption, particularly in countries that produce sugar, officials of the Bush administration hope to reduce the region’s overall dependence on foreign oil and to take some of the pressure off oil prices. . .
“This is more than a
document, it’s a point of convergence in the relationship that is denser and
more intense than anything we’ve seen in the last 20 or 30 years,’ Antonio
Simões, the director of the energy division of the Foreign Ministry of Brazil,
said in a telephone interview from
‘We have been waiting for this for a long time. Now it’s finally happening.’
Since the 1940s, sugar cane
and the future of ethanol have been the entire focus of our family in
Elisabeth’s father, the
former president of the Sugar Cane Growers’ Association in the largest sugar
cane region of
And since he passed away,
Elisabeth’s sister, the current president of the association, has picked up the
mantel, lobbying for ethanol in
All told, we’ve been harvesting, cutting, eating and virtually breathing sugar cane for many decades, always with an eye toward ethanol.
Now, this industry, still in its infancy, is finally taking off from the launch pad. But the big growth has barely begun.
‘The advantages of ethanol are overwhelming’
Unlike crude oil, the supply of ethanol is renewable and is not depleted.
And unlike gasoline, the refining and consumption of the fuel can be relatively clean.
Long term, ethanol is a
partial answer to global warming and could be a very substantial answer to
Shorter term, the U.S.-Brazil
ethanol alliance can even help reduce the growing influence of Hugo Chavez, the
president of oil-rich
In my January article, Ethanol Explosion! How to Profit, I explained it this way:
Suddenly and silently, the world’s demand for ethanol is about to explode, creating a global business that could make early investors wealthy.
Consider the facts:
Fact #1. Every country on the planet wants to see more of its automobiles running on renewable fuels like ethanol. And with 600 million gas- and diesel-burning cars and trucks on the road today, that implies the most massive transformation since the industrial revolution.
Fact #2. Every major government is implementing policies that stimulate ethanol consumption. And with hundreds of billions of public money pouring into research and development, this is not exactly a temporary fling.
Fact #3. Wealthy individuals, large banks, and major mutual funds are now going to be looking much more seriously at ethanol. And yet, the big flows of investment money into ethanol have barely begun.
A new mega-industry is born
For at least two decades — from the early 1980s to the early 2000s — the ethanol industry was largely stagnant.
Ethanol production in the
Then, at the turn of the new
millennium, two things happened: the
Result: Worldwide ethanol production has nearly doubled in five years ... the surge in volume has triggered the development of new, more efficient technologies ... and a new mega-industry has been born.
Right now, the only country
with cars running on pure ethanol is
Brazilian Ethanol: world’s richest investors are starting to pile in!
George Soros’s Adeco has
recently bought a major ethanol plant in
International companies are
one step ahead of them: Infinity Bio-Energy, which trades on the
Overall, investments in
The main attraction: ethanol
The key factor: innovative
ways of lowering the cost of production. Back in 1980, it cost
Already, nearly every
single car rolling off
The flex engine has
far-reaching implications. And although it’s going to take time, ultimately, I
see nothing that can stop it from spreading to the world’s largest fuel
consumers — the
Even before that
technological shift takes place,
Prime Minister Shinzo Abe
plans to increase consumption of biofuel for transportation to 3.15 million
barrels by the end of 2010. He will boost the ethanol content of regular
gasoline to as much as 10 percent. And as a result,
Nippon Oil and other Japanese
refiners have set their goals even higher. They want to replace 20 percent of
That’s why we’ve seen so many
Nippon Oil executives in
And this is just the beginning.
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.