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July 8, 2008
Big Oil - 1, Renewable Fuels - 0, part 1
I have written a major review piece on the state of liquid renewable fuels versus petroleum over the last four years. IT will be published in an upcoming issue of The Strategic News Service, after which I will post in parts here. Today I am posting the first two paragraphs:
Four years ago I ditched Technology for Energy and wrote about it for SNS. While preparing for FIRE this year, I had the opportunity to reflect on the last four years of renewable fuels in America. 2004-2008 will go down as arguably the first major battle, first real challenge, to petroleums 100% lock on our liquid fuels budget. In the same time period where Brazil reduced their petroleum consumption 40% largely through ethanol, Americas petroleum appetite grew by over 7% and we continued to consume more than a 1 out of every 4 barrels of oil on the earth. After over $30B of capital investment, Americas liquid renewable fuel industry is today valued at 30-40% of asset replacement cost and is faced with negative operating margins. Capital has fled the sector. The sad conclusion is that renewable fuels/biofuels have lost round 1. Big Oil ran the table, pitched a no-hitter, and skunked the visitors. During the last four years of unparalleled opportunity and investment in alternatives to petroleum oil, thedinosaurs have vanquished all comers.
At this point I could write a letter full of speculation, theories and even conspiracies as to how big oil has managed to maintain, and even improve their lock on our wallets, but I will leave that for another time. For now, let us just review the facts and the current state of the renewable fuel industry. Being the CEO and Chairman of Imperium Renewables, Inc. (5/05-1/08), the first large scale US biodiesel producer, I have been in the middle of this battle and have all the arrows in my back to prove it. While I remain an optimist, it is clear the dinosaurs wont go away without a BIG fightand it is going to take a lot more than nifty technology to get rid of them. While many today extol the virtues of next generation biofuels, the economic damage done to investors in this first round and the structural impediments that remain will provide a significant drag on the industry for some time to come. Let usstart with a few macro stats, a summary of the wrenches that have gummed up the works, and then onto a few modest proposals to help renewable fuels going forward.
Posted by Martin at July 8, 2008 11:37 AM
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