The Wisconsin Ag connection reports that foreign auto makers are turning their attention to E85.¹ They’re forecasting an announcement “very soon” from foreign auto makers to indicate plans to develop FFVs, or Flex Fuel Vehicles — vehicles that can run on gasoline, E85, or a combination of both.

One foreign car maker that is getting into the game is Volvo, says Azom.com in an article titled Volvo Creates Car that Can Run on Five Different Fuels.² Volvo’s new vehicle can run on hythane, biomethane, natural gas, bioethanol E85 and gasoline, making it one of the most adaptive vehicles ever introduced. It also is targetted as a high performance alternative-fuel vehicle.

I’m not a fan of Ethanol-based E85 due to all the farming regulations, subsidies and anti-competitive cronyism that exists in that industry. The Globe and Mail has a great article today titled Steering clear of the ethanol bandwagon that talks about the downsides of the alternative fuel market.³ As Professor Jim Lemon says in the article, Some sources are better than others — sugar cane is better as Brazil has proven; corn is not good. He also throws up his fists against the subsidies: In the United States, the federal government grants 51 cents (U.S.) per gallon to producers. I am a firm believer that the number one problem with gasoline and energy in general is too many subsidies and not enough of a competitive atmosphere due to overregulating of the industry, with too many preferential programs in place. We want freedom, not governance.

The politics of E85 always come into play ahead of the market efficiency, as we see in a campaign for a Michigan politician. U.S. Rep. Mike Rogers, the Republican incumbent in Brighton, MI, wants to promote ethanol production in order to bring Michigan more income.⁵ Lugar recently introduced the American Fuels Act with Democrat Obama from Illinois — an act that is supposed to promote locally produced and refined gas and gas alternatives. As many like me know, the U.S.’ largest fuel problem is the oversubsidization of a select few energy companies — subsidies that cost taxpayers billions and also keep competition from entering the market on the same level. Would you compete in a market if your competitors were receiving barrels of free taxdollars every day?

The debate on which fuel is better continues as NBC15 compares gasoline to ethanol.⁶ NBC15 is running an ongoing series titled “E10 on Trial” and ran a variety of tests to see if ethanol can hold up to gasoline. Their research surprised them by showing E10 ethanol to be more efficient in this test, with this particular vehicle. One thing to consider, though, is how much the subsidies cost and how far you have to drive to fill your tank.

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Environmentalists always try to find ways to disrupt any energy production possible, it seems, using any means possible. This time they’re trying to disrupt shale oil production in NW Colorado over the possible death of a species: a plant called the DeBeque milkvetch.¹ Rather than throw their money (and time) into moving the species to another locale, they’ll waste their days picketing, lobbying and harassing to get their way. If your property has a very unique specie of animal or plantlife on it, it means you have a rare resource. If the demand by environmentalists is high for this species, why not sell it to them at a nice profit? Let them raise the money, buy what they want, and provide for it with their own money. I sure don’t want to spend my tax dollars supporting any particular species of animal or planet if others are willing to cough up their own cash to do so. I’m not anti-environment, I’m pro-property rights.

The Daily Advertiser regurgitates the same news in a very short article today.² Some interesting information from them was included though: Gasoline and diesel are just two components of crude oil and make up approximately 30 percent of a barrel of oil. Other percentages are as follows: jet fuel 4 percent, butane, propane, ethane 1.7 percent, heavy fuel oil 1.7 percent, other 7.6 percent for a total of 44 percent. The remainder, heavy tower bottoms 46 percent, is converted to lube oil, asphalt and petroleum coke. We always consider crude oil useful for cars and trucks, but we rarely think of the other uses that crude is better at providing for than anything else. Even though the other 70% may not occupy a huge portion of the market, many of these smaller markets are much more profitable for the retailers in this country. We can’t write off crude entirely until we’re aware of new ways to create those useful byproducts.

Garfield County, Colorado is worrying about another boom and bust cycle from the new shale oil drive.³ This county has experienced more booms and busts than almost any other U.S. microeconomy over the decades usually due to skyrocketing import crude prices versus US dollars. Here is where we see the Federal Reserve’s crime: creating new money, pushing prices higher due to a weak dollar, and thousands of residents trying to profit from the mess the Fed creates. What they forget is that OPEC can just as quickly lower prices to snuff out the profit opportunities that they believed existed. It is very important for the U.S. and state governments to reregulate energy production as much as possible, including refinery, to level the opportunities as the free market would provide.

Aurora Oil & Gas announced the retirement of one of their members on the Board of Directors.⁴ Aurora Oil & Gas primarily works in the crude and shale markets of Michigan and Indiana, markets that are rarely discussed by the media.

LovelandFYI tells Congress to go slow on shale oil production in Colorado.⁵ They’re concerned about the boom and bust spoken of earlier in this article. Yet we’re now seeing the renewed drive being backed not just by small time speculators but also by huge oil conglomerates: companies who can deal with the risk for the long term. One of the biggest problems with Colorado is not the risk of making a profit but instead the risk of dealing with local and state governments who always want a bigger piece of the pie when profits are found. When the population grows to try to grab a piece of the profit, the governments grow faster and take a bigger chunk out of the residents and businesses. If the governments would leave the industry alone, I doubt we’d see the usual booms and busts. And when they don’t leave them alone (they never do), we’ll have to watch very closely to see how much government cries for more tax dollars when the market collapses for them.

ITPBusiness asks “Is peak oil pure fiction?”⁶ I don’t believe in Peak Oil theory myself — the price of crude oil is not significantly higher once you take into account all the destruction of value the dollar has faced with the Federal Reserve’s mad inflationary policy of the past 2 decades. We’ll know when there is a peak oil problem when gasoline costs exceed 10% of our household income. Until then, I am still paying less than 3% of my gross income for driving, and driving occupies more than 8% of my workday. I’m happy to pay 3% for the 8% I get to bill, gas is still a profit for me. If you’re not billing for your drive time, you’re in the wrong business. People have been crying about peak oil for well over 130 years.⁷ Since 1874 there have been repeated and regular analysis that the oil in the world would be used up within 4 to 15 years. None have been true, and I been none will ever be true. Our knowledge of the true source of oil is still thin: the analysts don’t even know where it comes from or how it is made. If oil is as plentiful and recurring as dirt and water, we’ll never hear it from the mainstream media nor the pro-oil industry analysts.

The Star Telegram has a great article titled “Small Barnett Shale Producers Cash Out.”⁸ Nearly US$50 billion has traded hands in the region with bigger companies buying up the smaller speculators and excavators. For me this is a sign of big things to come — when the big guys come into a market, you’re sure to see new efficiencies and profits to be found (as long as the big guys don’t try to get grants and subsidies for their work). This is a huge market that has been relatively ignored — US$50 billion over 2 years isn’t small beans. Some of the winners in the transactions were even ex-athletes.⁹

One big concern for shale oil producers is the lack of a necessary resource used in the extraction of shale: water.¹⁰ The answer by most analysts seems to be that the oil producers should work with local and regional water suppliers to get the water they need. There’s the government again, one more piece of red tape in an industry long dead from all the other red tape that killed it off the first few times around. It wouldn’t be a surprise to me if the easy hand in the pie by those in power would be control over the water resources rather than a direct tax or regulation. When we see profits, we see politicians.

Late Addition:
It seems like I missed the news that a bunch of ethanol producers are heading for an IPO.¹¹ Three of the largest ethanol producers are expected to have an IPO this year, with some as early as July. Projections are showing a possible doubling in IPO investments. I’m not a huge fan of ethanol based on the corn subsidies and regulations, but any step in a more local energy production is likely a positive one. Ethanol is made by distilling corn. For those who don’t know, distillation is illegal in the U.S.: you need a license by the Federal government to distill alcohol. Preferential treatment, anyone?

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