---------- Forwarded message ----------
From: Energy and Capital <eac-eletter@angelnexus.com>
Date: Tue, Feb 12, 2013 at 12:14 AM
Subject: Ethanol Sucks!
From: Energy and Capital <eac-eletter@angelnexus.com>
Date: Tue, Feb 12, 2013 at 12:14 AM
Subject: Ethanol Sucks!
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Ethanol Sucks!
By Jeff Siegel | Monday, February 11th, 2013
It's been labeled the worst U.S. drought in more than fifty years.
Crops
have been wiped out, farms have gone under, and herds of cattle and
pigs have been destroyed because there simply hasn't been enough
low-cost feed available to keep them alive.
Of
course, if you really want to dive into the issue, the fact that we
continue to feed our cows and pigs things neither God nor evolution
ever intended them to eat places the burden of blame on our shoulders.
If
we'd chose to shun the centralized industrial farming machine and
embraced local farmers that let their cows and pigs graze on grasses
and other natural feedstock (pigs love acorns, roots, and bugs) as
mother nature dictates, the lack of corn and soy would not have nearly
the impact it had on our overall food supply last year.
But sadly, that's not how we do things now...
These
days nearly all cattle and pigs raised for human consumption are fed
steady diets of industrially-grown corn and soy. So when the drought
hit us last year with all the subtlety of a brick to the face, we found
ourselves in quite a jam.
And
thanks to a government-mandated renewable fuels standard that requires
36 billion gallons of renewable fuel must be used per year by 2022,
last summer's drought crisis was actually amplified.
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Waiver Denied!
Despite
an avalanche of requests from Midwestern states and meat industry
groups to waive ethanol mandates during the drought, the EPA did not
relent, saying it had not found evidence to support a finding of severe
economic harm that would warrant granting a waiver.
According
to the National Drought Mitigation Center, damage estimates from last
year's drought were as high as $150 billion. And these numbers will
only continue to rise as more than half of the nation (58%) is still
getting battered by drought conditions.
Brian
Fuchs from the National Drought Mitigation Center has reported many
areas are going to go into this spring planting season with a deficit,
saying we are seeing it already with winter wheat, and it is likely to
continue.
Nah, this isn't severe economic harm... right?
I tell ya, the EPA is so clueless on this one. The organization that is charged with environmental protection is doing the exact opposite by maintaining the renewable fuels standard during this drought crisis. And make no mistake about it; this is a crisis.
But believe it or not, it actually gets worse...
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More Ethanol, More Problems
A couple of weeks ago, the Obama administration proposed a 9% increase in the renewable fuels standard.
So
we're still in full-scale drought mode... farmers lost crops and
livestock in record numbers last year — and are likely to match or even
break those records in 2013... and the government is suggesting we
actually increase the amount of corn going into our gas tanks.
I couldn't make this stuff up if I tried.
Now
I know some investors are eyeing up ethanol stocks again, based on this
new proposal. But let me warn you now, unless you can trade these
stocks, stay far away...
Most
of these biofuel plays tend to be very risky, and I suspect continued
supply constraints this year are going to further pressure margins.
What's
not particularly risky however, is domestic oil & gas logistics.
The process of moving indispensable supplies to shale operations and
taking the black stuff down to the refineries is what keeps this
nation's oil & gas boom sector booming.
At this moment, there is no greater domestic oil & gas opportunity than logistics. And these two logistics companies are absolutely crushing it.
If you're bullish on domestic oil & gas, you absolutely need exposure to this sector.
To a new way of life and a new generation of wealth...Jeff Siegel @JeffSiegel on Twitter Jeff is the managing editor of Power Portfolio, an independent investment research service focusing primarily on stocks in the modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
The Bottom Line
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