I'll be the first to admit it.

I'm not a huge fan of corn-based ethanol. 

There are just too many better solutions out there.  Things like Plug-In Hybrid Electric Vehicles (PHEVs) or, dare I say it - mass transit systems like those which are operating successfully and profitably throughout Europe.

That being said, if biofuels can help replace just 5 to 10 percent of our oil imports - and do it in a safe and sustainable way - then we probably shouldn't be so quick to write them off.

But that's the key.  Biofuel energy must be produced in a safe and sustainable way.  Otherwise, we're just trading one problem for another.

Biofuel Energy: Food vs. Fuel

A couple of years ago, the food vs. fuel debate really started to pick up steam.  After all, as ethanol momentum kicked into overdrive, so did the price of corn.  Certainly there's a correlation there that cannot be denied. 

But making biofuels the scapegoat for high food prices isn't completely justified either.

What about...

·        The skyrocketing price of oil

·        Surging global demand for grain and meat from China and India

·        Hedge fund speculation on commodity markets

·        Severe drought conditions like those we've recently seen in Australia

·        A weak dollar

I'm not saying biofuels don't play a role.  But how big of a role is questionable, as biofuel opponents have certainly been known to inflate the numbers in an effort to muddy the waters.  These tend to be the same folks who blame biofuels for higher prices at the pump.

Depends who you ask, and who you want to believe.

While the Heritage Foundation (an organization that has received about a half million dollars from Exxon Mobil) has accused ethanol of contributing to the high cost of gas, Merrill Lynch (a U.S. securities firm that launched 2 biofuel indices in 2007) has stated that U.S. gas prices would be 15 percent higher without the effect of biofuels. 

That would put today's average price close to $4.60 a gallon.

The Necessity of Sustainability

Even if biofuels do lower gas prices and can eventually help displace up to 10% of our oil imports... many of the environmental impacts of biofuel production must be accounted for.

After all, much of our agricultural system today is based on very dangerous, unsustainable practices.  And don't brush this off as some kind of environmental propaganda either.  There are many historical examples of how large civilizations have risen on the strength of their agriculture, but also crumbled because of unsustainable farming methods that destroyed the natural resource base.

The industrial agriculture system, for the most part, does not operate in a way that supports the long-term health of farmland.  And this goes for both food crops and fuel crops.

In an effort to feed growing populations, the demand for chemical fertilizer production has grown dramatically.  Unfortunately, most of the fertilizers used today are primarily derived from oil, natural gas and mined minerals.  And not only do these fertilizers add to the fossil-fuel bill, they can also gradually increase the acidity of the soil until it begins to impede plant growth. 

Chemically-fertilized land plots have also shown less biologic activity in the soil food web (the microscopic organisms that make up the soil ecosystem) than do plots that have been fertilized organically with manure or other biologic sources of fertility.

There's also the issue of water usage.

It's been estimated that it can take around 1,750 gallons of water to produce only one bushel of corn.  That stings!  Of course, we rarely blink an eye when we water our lawns.  On average, a homeowner uses 21,600 gallons to water his lawn every year.

Still, while the production of one gallon of ethanol requires three gallons of water, it takes roughly 2.5 gallons of water to produce one gallon of gasoline. 

Estimations for cellulosic ethanol do bring water consumption down to between one and 2.5 gallons.

Detour to Profitability

Now listen, I'm not writing this because I'm a huge believer in biofuels.  As I've already indicated, their contribution to getting us off foreign oil is modest at best.  And let's face it: we wouldn't even be discussing biofuels if it weren't for a lot of very convincing lobbyists and a handful of Midwestern Senators with dollar signs in their eyes.

But I do think it's important that we don't jump on the biofuel bashing bus without taking everything into consideration.

Is the biofuel industry operating in a sustainable manner, taking into consideration the long-term affects on agriculture and the environment?  They're not there yet.  But we believe they will get there.  Simply because they have no other option. 

The true test will be the next-generation technologies they deliver.  More efficient production processes and the introduction of better feed stocks, like cellulosic materials, jatropha and algae.

These are the advances that will not only allow the biofuel industry to counter its critics, but they are also the advances that will enable investors like you to profit from a solution that is not only environmentally sustainable...but economically sustainable as well.

For more on alternative transportation technologies, click here.

To a new way of life, and a new generation of wealth...

Jeff