This morning the Renewable Transport Fuel Obligation (RTFO) became law. It means from now on ALL UK fuel suppliers have to ensure 2.5% of their sales come from bio-fuels.
Literally overnight, bio-fuel consumption will soar.
But this is a flawed energy alternative... that’s actually very bad for the environment... and an even worse investment.
Here’s how you could really make money from bio-fuels...
The debate’s over.
A ‘New Bio-fuel Era’ has begun... and it will be disastrous for UK inflation, murder for the environment, not to mention your investments.
I'm going to urge you, with the proof that follows, to get your money out of the way - before it’s too late.
Of course, I’ll also show you the best way I believe you can position yourself to profit from this bio-fuel madness.
And it IS madness...
Firstly, bio-fuels CANNOT be a viable alternative to oil. Ethanol CANNOT be a viable alternative to petrol.
Why? Because it takes more fossil fuel energy to make it, than we get out of the finished product.
It’s simple maths that doesn’t add up.
Then we have to transport it into the country!
On 11 April D1 Oils (LSE: DOO) admitted it was forced to close its bio-diesel refining plants because it is unable to compete with cheap, subsidised US imports.
So much for it being an environmentally friendly fuel! Think of the carbon footprint of a tanker carrying ethanol across the Atlantic. It defies belief.
But the Government will insist on pushing ahead with this crazy policy. And that’s where the investment angle comes in to play...
It’s simple, buy food...
I reckon you should steer clear from bio-fuel stocks – and buy food instead.
The World Bank issued a report on the global food crisis over the weekend. It contained food-price forecasts all the way out to 2015 – more on those in a moment.
First, take a look at how the World Bank put the blame for food inflation firmly at the door of bio-fuels:
“Increased bio-fuel production has contributed to the rise in food prices. Concerns over oil prices, energy security and climate change have prompted governments to take a more proactive stance towards encouraging production and use of bio-fuels. This has led to increased demand for bio-fuel raw materials, such as wheat, soy, maize and palm oil, and increased competition for cropland.”
“Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for bio-fuels production in the US, while existing stocks were depleted by an increase in global consumption for other uses.”
“Other developments, such as droughts in Australia and poor crops in the EU and Ukraine in 2006 and 2007, were largely offset by good crops and increased exports in other countries and would not, on their own, have had a significant impact on prices. Only a relatively small share of the increase in food production prices (around 15%) is due directly to higher energy and fertilizer costs.”
See the madness?
Land once used for food crops, is being turned over ever more for the production of bio-fuels.
Burning food, exploding prices: One ‘food play’ to buy now...
And it’s not just us... the rush to bio-fuels is a global phenomenon, and numerous countries have set standards or targets.
The EU has set a goal of 5.75% of motor fuel use from bio-fuels by 2010. The US has mandated the use of 28.4 billion litres of bio-fuels for transportation by 2012. Brazil will require that all diesel oil contain 2% bio-diesel this year and 5% by 2013, and Thailand required 10% ethanol in all gasoline starting in 2007. India mandates a 5% ethanol blend in nine states, and China is requiring a 10% ethanol blend in five provinces.
I believe one day these targets will be scrapped.
But until they are, there will be a lot of money to be made in foodstuffs.
And it’s not just me that thinks so...
The World Bank believes the increase in food prices is not a temporary phenomenon, but likely to persist for a number of years.
It says high food prices in the medium-term are further strengthened thanks to policies aimed at achieving energy security and reduced carbon dioxide emissions. Not only that, it says it may present strong trade-offs with food security objectives.
Take a look at the World Bank’s food-price growth forecasts:
| Real Prices | 2007 | 2008 | 2009 | 2010 | 2015 |
| Maize | 141 | 186 | 176 | 155 | |
| Wheat | 157 | 219 | 211 | 204 | 157 |
| Rice | 132 | 201 | 207 | 213 | 192 |
| Soybeans | 121 | 156 | 150 | 144 | 127 |
| Soybean Oil | 138 | 170 | 162 | 153 | 119 |
| Sugar | 135 | 169 | 180 | 190 | 185 |
Whether you think bio-fuels are a good thing or not there is no question that food prices are going to stay high because of this phenomenon.
And it’s a sector I think you’d do well to have exposure to. In fact, the investment I recommend for this is one of my Smart Commodities UK core holdings. I believe it has a long, long way to go in the years ahead.
All the details of this ‘food play’ are yours FREE of charge along with four of my other core investments. I call them ‘power trends’.
Get all the details of this report by clicking here.
Regards,
Garry White
Editor Smart Commodities UK
