56. SUGAR CANE ETHANOL
There was an interesting cover story in Newsweek (Aug. 8, 2005) about sugar cane ethanol from Brazil. After reading it, I am convinced that ethanol (like gas-to-liquids) is a serious contender for replacing crude oil in motor fuels.
1) Brazilian sugar cane ethanol is much cheaper than oil. From the article: "Super-efficient Brazil now sells ethanol at the equivalent of $25 dollars a barrel, less than half the cost of crude." So I think we can dispense with the incorrect notion that no other form of energy is as cheap and convenient as oil (see #37). Brazilian sugar cane ethanol is cheaper than oil, just as convenient, and environmentally superior because it does not increase CO2 levels. ("In terms of price, the average cost of fuel ethanol production in the country (Brazil) is around 50 cents per gallon" Source)
2) Serious money is being invested: "To keep up with demand, local sugar barons and giant multinationals will invest some $6 billion in new plantations and distilleries over the next five years." This is on a par with Shell's $6 billion GTL (Gas-to-Liquids) facility in Qatar.
3) Ethanol production is booming. The growth rate is about 9% per year (click for a clearer picture, source):
4) World production of ethanol in 2004 was 10.77 billion gallons (=40.8 billion liters), which comes out to roughly 700,000 barrels/day. The heat content of ethanol is 3.5MMbtu/barrel (source), so energy production from ethanol is 2,450,000 MMbtus/day. Gasoline, on the other hand, has a heat content of 5.3MMbtu/barrel (same as previous source), and thus ethanol production is equivalent to gasoline production of about 460,000barrels/day.
On the average there are 19.5 gallons of gasoline in a barrel of crude oil (Source), so ethanol is providing the gasoline equivalent of 1 million barrels/day of conventionally refined crude oil. For comparison, Indonesia produced 1.2mbd of crude oil in 2003(source). Ethanol is as big a factor in the world gasoline market as Indonesia.
5) There's weird goings-on in the global sugar market:
9 August, 2005
Sugar prices 'to rise'
LONDON: Sugar prices, the highest for nearly five years, are entering unchartered territory as investment funds show a record interest in the commodity which traders see as increasingly tied to energy markets.Source
6) This is my favorite part:
A global biofuel economy, with a division of labor favoring the most efficient producers, is key to developing biofuels as a viable alternative to oil. For many developing countries, year-round growing seasons and cheap farm labor are a valuable competitive advantage over cold, high-cost northern countries. Super-efficient Brazil now sells ethanol at the equivalent of $25 a barrel, less than half the cost of crude. (Source: Newsweek, cited above)
The beauty of this plan is that it transfers money to tropical and sub-tropical developing nations, who can use the money to develop, and pass through the demographic transition. It's a good way to crack first world agricultural subsidies and tariffs which keep the developing world poor.
7) Interesting fact: The EIA classifies ethanol as "oil".
Total oil production (including crude, natural gas liquids, ethanol and refinery gain) has been rising steadily since the early 1990s... Source