Accusations of Disinformation, Speculation Make Biofuels Stock a Wild Ride
To a lesser extent the ride has been just as rough for ethanol stocks such as the Bill Gates ethanol vehicle, Pacific Ethanol (PEIX), Xethanol (XEN) and the blue chip of the group Archer, Daniels, Midland (ADM) for whom ethanol (and wind) production is just one division. As a new technology, some biofuels stocks have subject to both wild valuations (an expert at Zachs.com compares the current valuations to the Internet bubble of the 90s), and all have been both the beneficiaries and victims of the news cycles. Even the fundamentals of what on the surface appears to be a not particularly complex technology are the subject of wild debates in the media and online, with both the biofuels lobby and the anti-biofuels lobby accusing one another of deliberate disinformation.
What you say? You’ve never heard of an anti-biofuels lobby? And you would be right. How could any individual or group openly oppose the development of environmentally friendly alternative fuels that will also allow the West to wean itself away from its self destructive addiction to fossil fuels, particularly when the majority of those fossil fuels are found in regions of the world that do not necessarily have the best interests of the west in mind?
While there are clearly players that would be harmed by a strong upsurge in biofuels production and usage, including, of course, Big Oil and OPEC, the anti-biofuels lobby has long realized that it could not meet the challenge presented by the biofuels lobby head-on and still be seen as credible. The anti-biofuels lobby’s strategy has largely been one of stealth, resulting in accusations of deliberate disinformation campaigns from both camps, leaving a confused public and a nerve-wracking ride for holders of biofuels shares.
The wild fluctuations in biofuels stock prices have revolved around three basic stories. The last two of which have been extensively dissected, appended and rebutted by both side. Careful examination clearly demonstrates that two distinct agendas are at work here, both of which cite and create facts that best suit their cause.
The first story came about when President Bush, of proud big oil heritage, seemed to become a cheerleader for biofuels. He visited a biodiesel plant in Virginia, pronounced that the nation was addicted to oil and talked about “switchgrass” in his State of the Union address. It is hardly clear in the scientific community that switchgrass would be the best source of biofuel, but as a weed it certainly is the easiest and most cost efficient plant to raise and illustrates the scientific fact that almost any plant can be used in the manufacture of biofuels. The simple science breaks down to this. On average all plants are about 25% lignin and 75% carbohydrates or sugars. Any type of plant sugars can be used to manufacture biofuels, whether the plant is corn, soybeans, sugar cane, canola, switchgrass or your lawn. Switchgrass is hardly a special case. So while the President’s verbal enthusiasm for biofuel helped stocks early in the year and were mentioned appreciatively in remarks by Willie Nelson at the opening of an Earth Biofuels processing facility in Durant, Oklahoma, they did little to settle the issue of how soon biofuels would become a significant factor, how much it will all cost or at what point biofuels would become competitive with fossil fuels.
The next story in the news cycle was the success story of Brazilian ethanol made from sugar cane. Not only was Brazilian ethanol cheaper than gasoline but the Brazilians were on their way to energy independence in the very near future. With the recent run-up in oil prices enthusiasm for biofuels might have reached hysterical proportions if not for the third story in the news cycle, a clear reaction to the question asked by news anchors, “can we do what the Brazilians have done?”
The story was the nearly simultaneous release of three reports in response to the Brazilian story all three of which were summarized by the Department of Energy. The summary was widely reported in the electronic media and emphasized problems with biofuel production, repeating what biofuels proponents had long alleged were the most persistent bits of disinformation that they contended Big Oil had been putting up for decades.
The most widely quoted (and misquoted) of the reports was the one conducted by the University of Minnesota, which seemed to echo what the biofuels lobby had lone claimed was Big Oil inspired disinformation, the charge that ethanol required more energy to produce than it delivered. According to the report, ethanol produced from US corn would deliver only 25% more energy than it took to produce it. Biodiesel on the other hand, produced 93 percent more energy than was used in its production. Yet in the cases of both types of biofuels the Minnesota researchers concluded that production of ethanol using corn and production of biodiesel using soybeans would significantly impact the nation’s food production while addressing just a small percentage of its energy needs, another alleged Big Oil talking point.
These finding also appeared prominently on the Natural Academy of Science’s website as well as being widely reported in the electronic media. The pro-biofuels lobby countered with figures demonstrating that the figures from Brazil demonstrate that just 1.7% of Brazilian cropland is dedicated to ethanol production and that the most efficient oil used for biodiesel is canola oil, part of the normal crop rotation for wheat farming, which would represent no net loss of agricultural output. Unfortunately, virtually unreported by the electronic media, the report itself concludes with the statement that “Biodiesel provides sufficient environmental advantages to merit subsidy,” and that, “Transportation biofuels as synfuel hydrocarbons or cellulosic ethanol, if produced from low-input biomass…could provide much greater supplies and benefits than food based biofuels.”
