And the profits grow

[Kevin]

The US will follow when the economics (price/gallon) make any fuel cheaper than oil to produce. Currently, without government tax credits, no bio-fuel is cheaper now. In fact, sometimes I wonder if the tax credits will only confuse the issue and we will end up building the wrong energy infrastructure.

Right I'm aware of that. The situation was the same in the late 70's early 80's in Brazil as well. Bio fuels were not cheaper than oil based fuels for them either, but the infrastructure was mandated to be put into place and every gas station in the country had the alcohol, gasoline, diesel and there was one other choice I can't recall right now as options by I think it was 1985. The government worked with the auto manufacturers as well to help get vehicles that could use it. With the majority using flex fuel vehicles they could choose which fuel to use, which for a consumer would be whichever was cheaper. I can't find all the data again but by the early 90's the alcohol (what the ethanol at the pump is called) was usually cheaper.

I'm convinced that had the government not stepped in in the 70's that things for them would look more like the US. Even though the sugar cane to fuel process is cheaper than the corn process, it didn't make the fuel cheaper at first, because oil was cheap for a nice long time. As mentioned I think this was a situation where government involvement predicted the future correctly and things got better for citizens. I'm a firm believer in letting the market take care of itself most of the time, but that can still end up costing more in the long run. You consider what Brazil spent to get it all up and running and compare it to all that would have been spent staying with the status quo and what is being paid now, and it appears that it totals to less.

The US just keeps the view too short sometimes I think, which has pros and cons. You can prevent bubbles on the market by pushing and regulating for a longer view if you predict right, but you can make worse bubbles if you predict wrong. It's just interesting to see an example of guessing right and doing the gamble successfully.

It'd take A LOT more for the US to be remotely energy independent than Brazil. I just like to speculate how much closer we would be if we had pushed like Brazil and I'm interested to see how that all works out in China and India who are trying to do more than the US market forces are doing.


Oh and as to when it will be cheaper. It's already getting there, that is why fuel companies are looking at the studies for using steam from nuclear plants for the ethanol creation process and considering building plants. But without the fueling station infrastructure already in place there are higher barriers to entry than just production. Right now ethanol fuel could be 1/4 the price of gasoline in the US and someone could be producing enough to supply all the fuel needs in US and still not be able to sell it because the fuel stations aren't set up to handle it (no storage tanks) and the vehicles aren't set up to burn it. In order for private industry alone to get a push like this going they have to do more than just make the fuel. They need to get stations set up to sell it, they need to get the auto manufacturers to get vehicles out there that can burn pure ethanol (there are very few in the US still).

Hydrogen fuel cell vehicles face similar issues, that's why you can only lease them in certain parts of the country right now, because refueling can only be done at certain places.

You can draw parallels to the HD TV stuff too. Sets have been available for what 20 years now (I think that's how long Japan has been producing what we think of HD sets). Cable and satellite services have been able to deliver the content for quite some time as well, but never did because market saturation wasn't high enough. Without some of the government mandates we still might not have any of it really going still. Now quality of TV is a pretty frivolous issue to be sure, but there are some parallels.

So I wonder. Admittedly I need to read more on the Brazil case, It was first introduced to me in one of my economy classes in 95 and I did some looking at it then, but kind of let it slip from my mind till a year or so ago when I saw I think it was Modern Marvels episode on Nat Geo talking about bio fuels. And of course the current situation makes it more relevant as well.

My personal position? I haven't even been inside a car in nearly two years, I haven't driven one in 3. There are lots of reasons for this, many having to do with my medical condition, but I still regularly go to the store and get 2-3 weeks of groceries in one go. I just have a cooler attached to a 2 wheeled hand truck for fridge/freeze stuff and I can tie the bags on the 2-wheeler itself so I can easily walk to the store. Treesh can walk to work in 15 minutes or so from where we live, etc. So had some of this not been forced on me, the gas prices probably would have driven me to do it anyway. I know 2 years ago when I started doing this, I got funny looks, now I get lots of comments about what a clever way it is to save on gas costs and I saw someone else with a set-up like mine the other day.