It is getting almost daily, the new record price for crude oil in absolute terms. There are now murmurings that oil could hit $100 per barrel this week, not some time in a vaguely defined future. Before the next weekend. All this is helped along by shutdown of Pemex in Mexico. One media report points out $100 is still a bit shy of the real record price (adjusted for inflation) set back in 1980 during a previous Iran crisis. For you kids, that was when the Iranian regime seized the entire American Embassy and kept every American inside a hostage.
I found an analysis of gasoline prices. They're often seasonal, so weekly or month-to-month comparisons mean less than year-to-year, like corporate earnings reports. A year ago the average gasoline price in America was $2.21 per gallon, right now it's $2.87. That's an increase of more than 25% year-to-year.
So the economics of biofuel and other renewable alternatives is getting better and better. No long ago a government economist in the Ag Department thought $50 per barrel (at 2005 dollars) was the sweet spot for American biofuel. Well, we've certainly blown that away for the time being. Even allowing for generous inflation we should be at around $58/barrel in 2005 dollars. Not over $93.
The U.S. government economist did say there was a point where cheap oil makes ethanol uneconomical, "Below about $30 per barrel for crude oil, there would no incentive to produce ethanol...because ethanol would be unprofitable to produce and market as a fuel extender." Don't think the corn growers or ethanol distillers are worried about $30 price point that right now. Soon, it'll be cheaper to burn 10-year Scotch, than gasoline.
So with the prices of auto fuel so high two things come to mind: how you gonna grow enough "biomass?" Here's a piece that looks at the issue of land needed. Then does it make sense to make ethanol and other biofuels? They take energy to procue, of course. Tractors, fertilizers, harvesting, trucking, distilling, trucking again.
Secondly, there are many doubters, like this study that says ethanol is energy negative. That view of ethanol is not universally accepted. And then there's the big question: can it run a bus, train, car or truck? Sure, I love solar, but we're far from having efficient, affordable and portable solar systems to run vehicles. Solarize your parking lot, fine, but your car? Maybe someday. Until then we may birnj our alcohol as well as drink it.
Biofuel may not be energy-efficient but if it produces a marketable, lower cost fuel compared to any petroleum, derivative, it will be in demand. And if there's an American attack on Iran, bicycles could become the future tech. And corn prices will seek new heights.