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Jim:
>Well the concept of energy loss in any conversion technique is not
>new. Energy is lost in an electric motor. Corn absorbs energy from
>the sun and fertilizer, I guess. Seems to be pretty efficient.
No, it's pretty inefficient, and the sun has nothing to do with
it.
The point is, ethanol is currently a negative sum game. If all the
farm equipment and processing equipment used to produce ethanol ran
on ethanol, then the ethanol produced wouldn't be enough to run
the equipment to produce it. The fact that the equipment runs on
oil now doesn't matter - bottom line, the energy cost of producing
ethanol is higher than the energy available in the ethanol.
Add in the energy contribution from sunlight (which is free), and
the efficiency becomes even worse. All that energy going in, and
hardly any coming out.
Therefore, ethanol is NOT a viable fuel, and doesn't look like it
will be for the forseeable future. The reason oil works is because
it takes less energy to drill oil and refine it than the energy you
obtain from the products. If we ran out of oil today, producing
ethanol would exacerbate the problem.
In that sense, investing in an ethanol company stock is a gamble
that someday ethanol will be cost-effective. It might be, someday,
who knows?
Short term, GPRE may be a good buy due to the current fundamentals,
although I think you're ignoring return on capital. Looking at the
fundamentals long term, the market demand for ethanol is just not
there and not real; it's artificialy induced by politics, not real
market forces.
>What matters as far as the stock is concerned is dollars in vs.
>dollars out. They are getting much in the way of dollars out. My
>money is in.
As I said, for a short-term play, that makes sense.
-Alex
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