Ethanol Adding Fuel to the Fire - 2/17/09

There are droughts in two major agricultural countries, China and Argentina. Some experts believe 2009 could be a humanitarian disaster around the world and possibly a catastrophe.

A large percentage of the worlds agricultural countries are experiencing drought conditions. These countries include China, Australia, Africa, South America and the U.S. Ruined crops and dying cattle can be found in all these areas.

Right now the world is experiencing deflation which is pushing prices of all commodities down. With this producers of those commodities scale back or even stop production. A 20 to 40 percent decline in world production will cause rising food prices. Add ethanol to the equation and there could be real problems.

Shell has been force to convert all their company and independent gas stations over to an ethanol blend, which will put more demand for corn used in producing ethanol. Most people believe ethanol is a good thing, but most people don’t know an ethanol blend has less energy than unblended gasoline. This means less gas mileage. Doesn’t this defeat the reason for using ethanol? There is little or no decrease in the use of foreign oil?

Some experts believe agricultural commodities need to start going up in price soon to prevent food shortages and famine. Higher agricultural prices encourage additional planting. If food prices stay and current production levels fall a worldwide food shortage could begin.

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