Priming the E85 Pump
Last Sunday, I had dinner with my aunt, who lives in Chicago. She
recently bought an Impala LT
(she's a loyal GM customer), and was surprised when she received a $1000 debit
card with which to buy E-85, the
85% Ethanol, 15% gasoline blend used in flex-fuel vehicles.
I was not able to find any web reference to this offer (including on the GM
website),
but Google still had a cached
article from HowStuffWorks.com which explained: To help defray fuel
costs, GM, as part of its "Live Green, Go Yellow" E85 ethanol
campaign, gives buyers of its flex-fuel vehicles a $1000 debit card toward the
purchase of E85 ethanol fuel. (As of November 2006, the offer was good only to
buyers in the Chicago and Minneapolis areas.)
To me, this is a sign of desperation, both on the part of GM to sell a car
rated 16 MPG city / 24 MPG highway as "green." If GM really wants to
help defray fuel costs, might I suggest not fighting
increased CAFE standards?
It's also quite possibly a sign of desperation on the part of Midwest ethanol
producers, who are producing ethanol at a record pace despite rising corn
prices, but have difficulty transporting
it out of the region because the corrosive and water-absorbing nature of
ethanol means that it must be transported by truck or rail rather than
pipelines. I speculate that Ethanol producers and distributors contributed
to these debit cards as a way to make new Flex-Fuel vehicle owners aware that
they could use E-85 and to give them the incentive to seek out and become
familiar with the
stations where E-85 is available.
For Investors
Is this good news for Ethanol investors? Possibly. It's a clever
way to overcome some of the biggest barriers to E-85 use: lack of familiarity
with the fuel, and lack of awareness among flex fuel vehicle owners.
Ethanol producers have taken a beating in the stock market, but if this campaign
and others like it are successful, they may spur demand for ethanol in precisely
the region where we have over-capacity.
Investors should
not consider ethanol stocks to be particularly green, but ethanol does begin
(in a small way) to address the
problem posed by peak oil: how do we get liquid fuel from other sources
which we can use in our current car fleet? So an investor more concerned
about peak oil than global warming might consider taking another look at ethanol
stocks now that they're selling at much better prices than they were just a few
months ago. However, I still prefer
producers based outside the Midwest or ones that also own the corn they use.
DISCLAIMER: The information and trades provided here are for
informational purposes only and are not a solicitation to buy or sell any of
these securities. Investing involves substantial risk and you should evaluate
your own risk levels before you make any investment. Past results are not an
indication of future performance. Please take the time to read the full
disclaimer here.
November 4, 2007
Did you like this article?
Submitted By 
's
