At least we've got our health...

Keep that in mind, because the news is not particularly good for our market-driving ethanol biz lately. Something that we pretty much suspected but didn't want to find out:

Together the two studies offer sweeping conclusions: It does not matter if it is rain forest or scrubland that is cleared, the greenhouse gas contribution is significant. More important, they discovered that, taken globally, the production of almost all biofuels resulted, directly or indirectly, intentionally or not, in new lands being cleared, either for food or fuel.

“When you take this into account, most of the biofuel that people are using or planning to use would probably increase greenhouse gasses substantially,” said Timothy Searchinger, lead author of one of the studies and a researcher in environment and economics at Princeton University. “Previously there’s been an accounting error: land use change has been left out of prior analysis.”

These plant-based fuels were originally billed as better than fossil fuels because the carbon released when they were burned was balanced by the carbon absorbed when the plants grew. But even that equation proved overly simplistic because the process of turning plants into fuels causes its own emissions — for refining and transport, for example.

The clearance of grassland releases 93 times the amount of greenhouse gas that would be saved by the fuel made annually on that land, said Joseph Fargione, lead author of the second paper, and a scientist at the Nature Conservancy. “So for the next 93 years you’re making climate change worse, just at the time when we need to be bringing down carbon emissions.” [More]

Meanwhile, $5 corn is narrowing ethanol margins just in time for an unexpected forecast: significantly lower gasoline prices - by as much as 50 cents. This is precisely the worst thing that ethanol producers want to see.

There's some evidence to support the fiscal forecast. The U.S. government confirms supplies in the States are already at a 14-year-high because of falling demand. "Gasoline stocks are continuing to increase and it implies that people are probably cutting down on gasoline consumption - a result of the weakening economy," notes analyst Phil Flynn.

Some are touting figures that suggest demand for gas stateside is down to about one percent more than the same period in 2007. But it typically grows by 1.5 to 2 per cent a year, an indication that things may be changing.

"Something dramatic is occurring with consumer driving habits," posits Geoff Sundstrom of AAA, the American version of our CAA. "These numbers, if sustained over the next couple of weeks, should set the stage for a reversal of price forecasts." His prediction: don't be surprised to see lower per-litre rates on your marquees if the trend continues, especially with the current high costs of a fill-up.

"High gasoline prices by themselves have never altered consumer driving habits," Sundstrom advises. "Only when combined with some other factor have they fallen. In this case, it's anxiety about a recession."

He blames it on a ripple theory. Fewer people spending means less business and sales. Less business means fewer sales calls. Fewer sales calls means fewer road deliveries and fewer trips to the mall for consumers. Fewer trips means less cars on the road. And that translates to lower prices. [More]

Not to worry, ethanol has been able to pretty much steamroller any scientific objections and override any economic factors. Still the long-awaited consolidation of the ethanol industry could be triggered by the piling-on effect of multiple clouds on the horizon.

Looking ahead into 2008, analysts say consolidation activity should occur and become a significant element in the FTC’s 2008 report. Evidence of this trend became obvious when two of the largest ethanol producers—VeraSun Energy Corp. and U.S. BioEnergy Inc.—announced a monumental merger agreement one day after the 2007 FTC report was released. “To our knowledge, we haven’t seen too much consolidation outside of the U.S. BioEnergy/
VeraSun deal,” Garcia says. “So, there are no real mechanisms for the market to get further concentrated. I would guess that the concentration percentage would be going lower like it has.”

According to Alexander, on the other hand, the ethanol industry’s inherent and turbulent commodity cycle could increase concentration before the 2008 report. “I do expect the industry to become more concentrated,” he says. “The industry is a commodity business. In general, commodity businesses move toward a situation where there are several large players who can capitalize on the economics of scale to lower their marginal cost of production, and I expect that the ethanol industry will be no different.” [More]

The more interesting phenomenon is the interest in multi-power vehicles, such as the Chevrolet Volt. They seem to be commanding attention at recent car shows.

Seldom talked about two years ago, plug-in hybrids are popping up all over the auto-show circuit.

Saturn says it hopes to sell a Vue plug-in with a 10-mile electric-only range by 2010, and Toyota says it will have a few hundred plug-ins in commercial test fleets by then.

Others are trying to get in the game.

AFS Trinity Power Corp. of Bellevue, Wash., has equipped a 2007 Vue with a prototype plug-in system it says can go 40 miles on lithium-ion batteries before a 4-cylinder engine kicks in for gas/electric operation.

Estimated cost is $8,700 for the Extreme Hybrid system -- based on an automaker producing 10,000 or more cars per year (production costs go down as volume goes up).

The 40-mile electric range equals the target set by General Motors for the Chevrolet Volt plug-in it hopes to produce starting in 2010 if lithium-ion batteries are ready. Plug-ins can recharge their batteries with household current. [More]

I've had a hard time seeing any rational answer to our energy future without greater conservation and lower consumption. Depending on how bad the current slowdown eventually becomes, we could alter some old driving and energy use habits pretty quickly, I'll bet.

Even farmers have been surprised how fast the ethanol industry grew to respond to mandates. Now I wonder if we'll be equally stunned how fast other industries and consumers respond to ethanol's success.