Money changes things. When oil was $20.00 a barrel, the idea of blending corn squeezings with
petroleum or manufacturing fuel from used french-fry grease seemed goofy. Now, oil is above $60.00 a
barrel, and geopolitical issues portend even higher petroleum prices. It’s time to get serious about
renewable fuels as alternative energy sources, and luckily, the marketplace is taking steps in that
direction.

Money changes things. When oil was $20.00 a barrel, the idea of blending corn squeezings with
petroleum or manufacturing fuel from used french-fry grease seemed goofy. Now, oil is above $60.00 a
barrel, and geopolitical issues portend even higher petroleum prices. It’s time to get serious about
renewable fuels as alternative energy sources, and luckily, the marketplace is taking steps in that
direction.

NOT JUST IRAQ

The war in Iraq and Hurricanes Katrina and Rita are two obvious reasons for increasing oil prices, as
these events disrupted petroleum supply chains. However, one not so obvious reason is that China has
awakened its production power, and is now one of the largest gas guzzlers on the planet. Petroleum fuels
production, and petroleum byproducts are used as ingredients in textiles and plastics, both of which
China manufactures and exports en masse. Iraq and the hurricanes were temporary situations; China’s
growing manufacturing sector is not.

Adding to the upward pressure on petroleum pricing is the current leftward swing in Latin American
politics. Chile’s recent elections brought in a strongly leftist government, joining Venezuela’s socialist
leader, Hugo Chavez. Brazil also is leaning in that direction. The one common thread among these
countries is that they all export oil. Chavez already has nationalized the oil industry, and this may
motivate the other two countries to follow his lead. These government-run monopolies can then dictate
the per-barrel price for their crude, much like OPEC does now.

Finally, Iran has begun their extortion of the world market by threatening to cut production unless
everyone turns a blind eye to the expansion of their nuclear program. The rest of the world agrees that
Iran’s nuclear capabilities make it a threat to humanity, but the price of implementing defensive
measures will certainly be an increase in crude prices. Iran literally has the world over a barrel – of oil,
that is.

Our own economic growth has been threatened by rapidly rising oil prices, and the subsequent hysteria
on Wall Street that the wobbles in commodity pricing creates. Pulling the plug on petroleum dependence
will benefit us politically and economically.

ADDITIONAL POSITIVES

Breaking our bonds of enslavement to the whims of petty dictators is, of course, the primary benefit of
utilizing home-grown, renewable fuels. But there are other benefits that make this move worthwhile.

One large plus is that both ethanol and biodiesel burn at lower temperatures than gasoline. This means
that engines using either of these fuels experience less wear and tear, and last longer with routine
maintenance. Not only will consumers pay less for a gallon of gas, but their cars will hold up longer as
well.

A secondary benefit is that ethanol and biodiesel refineries are usually located near the source of their
fuel, which means they are built in rural areas. This brings good paying construction and technology
positions to areas that often are economically dependent on either agriculture or one large company that
employs most of the people in the area. Importing economic diversity into these areas brings stability
and allows individuals who may prefer a rural lifestyle to have a professional career as well. In addition,
many refineries are cooperative ventures. Area farmers pool their capital together in order to build the
plant, and then share in the profits once the plant is in operation. This offers farmers another hedge
against low crop prices during “boom” years; what they lose in selling the crop, they can gain back with
the sales of their value-added product.

Finally, American automobile manufacturers have begun producing Flexible Fuel Vehicles (FFVs).
General Motors in particular has several models for sale that can run successfully on either gasohol (E-
85 ethanol blend) or regular petroleum. If the demand for these vehicles grows in the near future,
American auto manufacturers are already on the cutting edge. This could allow them to surpass Japanese
and Korean manufacturers, and pull companies like General Motors and Ford away from the brink of
bankruptcy.

DEMAND CREATES SUPPLY

The marketplace works when demand meets supply, and the demand for renewable fuels is increasing.
In response, several communities in the midwest are quietly removing barriers to the erection and
operation of ethanol and biodiesel plants. In the state of Indiana alone there are currently three refineries
under construction. The governor has also designated the town of Reynolds “Biotown, USA,” and
General Motors has donated 20 Flexible-Fuel Vehicles to townspeople for their use. The municipality
itself has pledged to convert its fleet to biofueled vehicles.

Senators Richard Lugar, Barack Obama and Tom Harkin also introduced legislation mandating that all
automobiles sold in the United States be Flexible Fuel vehicles within ten years. This mandate may not
have passed yet, but it looms large and the automobile industry would be best served if it were proactive,
rather than reactive, in this initiative.

Renewable fuels can never fully replace the demand for petroleum, but turning the gas-producing spigot
from a stream to a slow drip can force prices down for crude, and relieve many of the gas pains the
economy is currently experiencing. Combine the economic benefits with the environmental gains –
ethanol and biodiesel both burn cleaner than gasoline – and it’s easy to see why corn and soy should fuel
our future.