BioDiesel for all

Biofuels are gaining a lot of attention as of late by the private investment community, as well they should. Biofuels are biodegradable, non-toxic, have significantly fewer noxious emissions than petroleum-based fuels when burned, and they are renewable. In a time when political unrest poses threats to the oil supply and the whole world is making changes in an attempt to stop climate change, the biofuel sector is appearing very attractive to many investors.

A broker's job should be to look out for your best interest as a client. Sadly, this is something I have seen not enough of during my time in the securities industry. The reality is that a broker's job is to sell a product. He accentuates the positive. While he is obligated by law to disclose pertinent facts about the program specifically that could shed a negative light, it is not his job to point out the weaknesses and potential drawbacks to a market or industry as a whole. That is your job as the investor, it's part of the due diligence process to know what kinds of questions to ask and where to look for answers. Today's 21st century Internet capabilities make this task much easier than in the past.

The reality is that most brokers simply are not educated enough about their own industry. They know the specifics about their own programs and whatever propaganda their company tells them about their strategy and not much more. In many cases they got into the job because they are good salesmen and there was a high income potential, not because they happen to be particularly interested in soybeans.

After nearly three decades of work, Brazil has succeeded where much of the industrialized world has failed: It has developed a cost-effective alternative to gasoline. Along with new offshore oil discoveries, that's a big reason Brazil expects to become energy independent this year. While this is a significant and impressive achievement, it is a very crude model. The design of many of the most popular investments today are based on that model.

Disadvantages of using biodiesel produced from agricultural crops involve additional land use, as land area is taken up and various agricultural inputs with their environmental effects are inevitable. Switching to biofuels on a large scale requires considerable use of our arable area. Even modest usages of biodiesel would consume almost all cropland in some countries in Europe. If the same thing is to happen all over the world, the impact on global food supply could be a major concern, and could make some countries become net importers of food products, from their current status of net exporters. It could so happen that most lands on the planet are deployed to produce food for cars, not people.

Obviously, there are some serious problems with this model and with where the majority of the industry is headed right now. This is a good thing to know before making any investments. Realistically, if the numbers make sense then more than likely investments based on the current model will be profitable for several years, maybe more. Current levels of biofuel production are not enough to cause third world riots just yet, but a lot of people are yelling about it and it's a possibility that's getting closer if we keep moving in the same direction.

Obviously conventional agriculture is not a long term solution to give us enough raw materials to replace petroleum. Now what? Fortunately many brilliant minds have been working on this problem for years and have come up with some interesting solutions. If you'd like to find out more about biofuels and other sources of alternative energy take a look at the alternative energy page at the Society of Enlightened Capitalist Elite site at