But the reality couldn’t match the hype, as the raw materials and cost required outweighed the output, and people realized that it would take greater viability to truly change people’s habits, psychology and the status quo in the energy sector.

But in today’s guest editorial from The Street Authority, editor Andy Obermueller explains how a different form of ethanol biofuel could revolutionize the landscape in just a few years – and hand early investors some outstanding potential profits. Check it out below…

Martin Denholm, Managing Editor, Smart Profits Report

The Ethanol Equation

In 1976, a businessman in North Central Kansas commissioned a CPA firm to do a feasibility study into the financial viability of a commercial-scale ethanol plant.

This businessman and his partner owned farmland and grew a little corn. And the ethanol concept that gained momentum in the 1970s post-oil embargo period piqued their interest.

But when the study was completed, the answer was abundantly clear: The technology wasn’t there and the project wasn’t financially viable. So the businessman – my father – focused on other ventures. It turned out to be a wise move, as most people who invested in ethanol in those years lost money.

Flash-forward to today, where ethanol has become a significant element of our national energy strategy. But it’s never existed without significant federal support in the form of subsidies and import tariffs.

So is this energy resource any more viable today? Let’s take a look at a different form of ethanol production – and a government mandate that aims to propel its progress…

The 16-Billion Gallon Biofuel Revolution

There’s one piece of federal legislation George W. Bush signed into law that President Obama likes: The Energy Independence and Security Act of 2007, which went into effect on January 1, 2009.

It requires the U.S. to use a total of 36 billion gallons of biofuel by 2022.

The rub is that only 15 billion gallons can come from corn-based ethanol. Right now, the U.S. produces 10 billion gallons of corn-based ethanol per year, bolstered by billions of dollars in federal money. That’s on track with federal production targets, which peak at 15 billion gallons in 2015.

Instead, the lion’s share of that 36 billion gallon total – 21 billion gallons (or 58.3%) – must come from “advanced biofuels” that are 50% cleaner than gasoline. And of that total, an aggressive federal timetable for 16 billion gallons to come from something called “cellulosic” biofuel by 2022.

The U.S. isn’t producing any of it right now. In fact, only a few companies even know how. And as these federal mandates take effect, the handful of companies that control this technology could see demand grow by 15,900% – and their revenues follow.

The Sugar Solution Making Ethanol A Viable Energy Solution

So what is cellulose anyway?

It’s a compound found in all plants – from hardwood trees to the grass in your yard. It’s the most common organic compound on Earth. Chemically, it’s a sugar (hence the “-ose” at the end of the word ) – and that means it can be easily fermented into ethanol.

And while corn-based ethanol does have modest growth prospects over the next few years, cellulosic ethanol’s trajectory – again, written into federal law -blows corn out of the water. That’s because the U.S. doesn’t produce much cellulosic ethanol at the moment, mostly because the technology is still being refined.

But the technology is very, very close to coming online. Several demonstration-scale plants are operational. And after scientists nail down the process, the U.S. could see the biofuel industry go from producing almost zero gallons of cellulosic ethanol to 16 billion gallons. That’s a 15,900% increase in only a dozen years – enough to turn a $10,000 investment into $1.6 million.

And investors who get in on these cellulosic ethanol fuel companies at the ground level could be set for a huge profit windfall.

Source: The Biofuel Revolution: Why Now Is The Time To Invest In Ethanol Stocks

You see, this past Tuesday, his Investment U article caught my attention. In case you missed it, it was written about green energy. In it, Louis makes an argument for a “green energy super-bubble” that could burst in as little as two or three years, leaving unwary alternative energy investors in the lurch.

In his article, he cites four conditions that exist that make alternative energy ripe for a bubble. Those conditions may indeed be forming, but in and of themselves won’t cause a “speculative bubble.” In this case, there’s definitely more to the story.

The Defense of Alternative Energy & Green Investing

Louis: “The legislation is in place, and more is on the way.”

You’ll get no argument from me that Bush’s foray into increased ethanol production was misguided at best. But unlike ethanol, solar, wind and geothermal tax credits have been the catalysts that have energized those respective industries.

Improvements in technology have resulted in generation costs on par with – and in some cases, below – conventional fossil fuel sources. And with regard to solar in particular, costs per watt are on track to drop another 50% in the next few years. And in spite of the lower costs, industry margins will be in the 35% to 50% range, three times what they are today. That’s a recipe for increased earnings if I ever saw one.

Louis: “Money is already pouring into the sector.”

The $200 billion that Louis said flowed into the sector in the last two years is about right for a capital-intensive business like alternative energy. If it weren’t flowing into alternative energy development and deployment, where else in the energy sector would it go?

To pay for higher oil, for one, but perhaps it’s easier to describe where it won’t be going:

• No one wants a fossil fuel plant in their backyard (few are even planned, let alone being built), and you can forget about any new nuclear power plants here in the United States.
• Only a few are even in the permit stage (a 10-year process in and of itself), construction can take 10 to 15 years, and cost $15 to $20 billion. In June 2008, Moody’s estimated that the cost of power produced by a nuclear plant might possibly exceed $7 per watt, 10 times that of solar’s $0.70 per watt. And then there’s the spent fuel issue, decommissioning, etc.

Plenty of Room to Up Spending on Alternative Energy

Given that the United States alone spends over $500 billion every year on foreign oil, there’s plenty of room to up the spending on alternative energies like wind power.

Besides, we don’t really have a choice; cheap energy’s the key ingredient for economic growth. The problem with coal, oil and natural gas is that they are all finite resources, and we’ve already used all the best deposits (those with the highest energy content). Combine that with oil prices that will likely be closer to $100 a barrel by the end of the year, reigniting interest in alternatives.

Louis: “Tough credit conditions actually encourage more speculation.”

I’d argue that it’s really investment we’re talking about, not speculation. Because of the tax credits mentioned earlier, many start-ups already exist – particularly in the solar sector – where no less than 143 companies are currently playing in the thin-film segment of the industry.

There’s no question that they won’t all survive. But those that do will have viable, long-term business supplying the world with much-needed alternatives to fossil fuels.

Louis: “Green is the new black.”

Here I whole-heartedly agree, but for a different reason…

A Paradigm Shift Is Underway In Alternative Energy

There’s a paradigm shift underway in the alternative energy sector. Fossil fuels are on their way out and green is on the way in. It’s going to be a 20- to -30-year process, and that’s why it’s destined to be such a great opportunity for investors.

It’s not just a “U.S. social responsibility” thing, either. In fact, it’s just the opposite. Our alternative energy roadmap is far behind those of many other nations. Take Portugal, for instance, where over 60% of their energy comes from renewable sources. Their goal? 100%. China and Germany also have aggressive alternative energy generation plans underway.

And because of all the government tax incentives dangled in front of the myriad companies, cost-effective solar panels and wind generators are already in use, generating power that produces no greenhouse gas, and more importantly, don’t use a drop of oil when running.

Here’s the bottom-line: The global need for cheap energy is so monumental, alternative energy is destined to remain a target-rich environment for many years to come. Will some companies be better investments than others? Of course… just like they are in any other sector.

But a bursting bubble in two to three years? I don’t believe it. Actually, a mini one burst last year when oil dropped from $147 a barrel to where it is today, driving many solar, wind and geothermal stocks down as much as 80%. The valuations that these companies are sporting now are, in many cases, as low as they’ve ever been.

And that has helped to set up what could be one of the best sectors to invest in moving forward… for decades to come.

One thing you can be sure of: Both Louis and I will be watching it all unfold with an eye (or two, in this case) towards providing you with some great ideas for investing… and maybe for a few bragging rights.

Source: Alternative Energy: Why You Can’t Ignore “Green” Investing

The new president didn’t actually say much on the campaign trail, but he said it well. He invited Americans to dream, actually to fantasize, about an unreal world in which their government will care for them using its own unlimited supply of money – money that comes from some mysterious place that too few people have even thought about, much less understand.

Voters are said to have turned to the left, to liberal candidates, in part out of a desire to change the economy’s direction. Their choices at the polls are said to reflect their concern over the economy’s descent into recession, loss of jobs, and the collapse of their retirement accounts. These are legitimate and understandable concerns. Unfortunately, voters have not done the hard work of learning about and understanding basic economics. As a result, they have set themselves up for their predicament to worsen exponentially.

I think it’s safe to say that we don’t really expect politicians to keep their campaign promises. We can only hope that the new president will conveniently forget to raise taxes on capital gains and dividends, raise the top income tax rates, impose a windfall profits tax on oil production, maintain or raise high corporate tax rates, collect more social security taxes, mandate higher ethanol production, expand regulation, and add new entitlements, just to recall a few of the proposals bandied about during his campaign. We can’t all ride in the wagon. Someone has to pull it.

The presumption seems to be that government has a big job to do in cleaning up this mess and it will need more money to do so. Wrong! Government is still the problem. Obama has promised to help the Blue Dogs (fiscally conservative House Democrats) achieve fiscal discipline, including honoring the pay-as-you-go (“PayGo”) rule against adding to the budget deficit. There are only two ways to do that… need I say more?

There are limits to how much tax you can extract from the populace before you are faced with open revolt. While Obama’s tax increases are ostensibly imposed on the rich, the pain of those tax increases will also be felt by the poor. Moreover, there is no way that straightforward taxation will be enough. Instead, we can count on more of the surreptitious, insidious, and brutally regressive tax of inflation to fill the gap.

This should have been a contest focused on the real, underlying issue facing Americans and the world: will we choose more or less government? Instead, the contest was over more government or much more government. It appears voters chose the latter. They know something is wrong, but like a drunk taking “a hair of the dog that bit you” to ease the pain of a hangover, Americans are hoping to cure their ills with another dose of the same poison that made them ill.

I have heard the new president described as a fall guy. In a way it’s too bad that he may mean well but will probably preside over economic hardship that persists for many years. At first the continuing debacle will be blamed on George Bush and a Congress with enough minority influence to have thwarted the grand plans of a thin majority. Inevitably, however, the inherent character of government and politics will be apparent in this new administration as well. The nation’s chief executives and legislatures of both parties have shared in contributing to today’s economic meltdown all the way back to the creation of the central bank in 1913. The Obama administration is backed by a now stronger congressional majority that is very nearly filibuster proof and no longer needs to worry much about mustering the supermajority required to override a presidential veto. Those who sent Barack Obama to the White House are anxious to see their fantasies made manifest. They may be patient for a little while, but not for long.

Hillary Clinton ultimately did a great job of helping to boost Senator Obama into the White House. Some say she’s now a shoo-in for a White House appointment, but she at least professes to be happy to continue being the best senator from New York that she can be. Probably a wise move.

Barack Obama came to office with the promise to deliver “Change We Need,” but we know that, since Texas Congressman Ron Paul left the race, no one has had the cojones to actually discuss the change we really need.

I wish the new president well and hope he will, miraculously, do the right thing. In my heart, however, I know he cannot. Leveling with Americans would be political suicide. In their own way, the Obama administration and a cooperative legislature may pave the way for a truth-telling politician in the future – an honest, uncompromising man or woman whose message today would be ignored and drowned out, even by the fading echoes of election night euphoria.

Times they are a-changing faster and faster, it seems. Staying in the loop on current economic events, one snapshot at a time, is easy – with Casey’s Charts. This weekly glimpse of the big picture is absolutely free of charge; PLUS, get your limited-time FREE bonus report “The Crisis in Pictures.” Click here for more.

Source: The Times, They Are A-Changin’

Biofuels can boost incomes and yields for farmers, revitalizing impoverished rural areas when they are introduced in countries with secure land ownership, the International Institute for Environment and Development said.

By raising the price of crops such as corn and palm oil, biofuels can reduce poverty in countries with a high dependency on agriculture, the London-based researcher said in a report with the United Nation’s Food and Agriculture Organization.

“Despite the highly polarized debate, biofuels are not all good or bad,” lead author Lorenzo Cotula of the IIED wrote in the report. “Biofuels can either help or harm the world’s poor depending on the choice of crop and cropping system, the business model, and the local context and policies.”

“Ethanol stocks were moving higher for a while,” says Charles Delvalle in Investor’s Daily Edge, “but have gone down since the middle of last year (maybe investors are catching on to how ‘not green’ ethanol really is). Geothermal producers are shooting higher. And those who sell wind turbines are making great money on increasing orders.

“By 2030, Morgan Stanley expects green sales across the globe to total over $1 trillion (that’s bigger than the Gross Domestic Product of 169 of the 181 member countries of the International Monetary Fund!). Most people I speak to see green technology as the wave of the future. It’ll only be a matter of time until they think that investing in green companies is a no-brainer.

“In the end, this whole green movement we see today could very well be the start of yet another massive bubble. And considering the riches that were made during the two previous bubbles, catching the green investment mania early on would be a great way to make a lot of coin in the next few years.”

Chris Mayer in The Daily Reckoning reckons it’s time to consider investing in an essential biofuel ingredient: sulfuric acid.

“The biofuel boom has kicked off a big increase in the demand for sulfuric acid. In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a double whammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000-4,000 tons of sulfuric acid per year.”

According to the London Times, the price of sulfur has risen from $50 to $500 a ton in under a year. More from this report:

“Shell is one of the most-efficient producers of sulphur,” Barry Clarke, a sulphur market analyst for Pentasul, said. Shell produces about 3.5 million tonnes of sulphur, much of it from its Canadian oil sands business, and its cost, Mr Clarke reckons, is merely the rail freight cost of getting the sulphur to a port, about $25 a tonne.

Mr Clarke agrees that sulphur, once a burden, could earn the oil industry billions this year. “It’s going to show up in the earnings of companies,” he said. The price is expected to rise further with spot cargoes changing hands for as much as $700 a tonne. Demand for metals is also keeping sulphur bubbling, as sulphuric acid is used in the mining industry to leech metal from ore.

“The biofuel boom has kicked off a big increase in the demand for sulfuric acid,” says Chris Mayer in The Daily Reckoning.

“In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a double whammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000-4,000 tons of sulfuric acid per year.

“Then there is that great demand pull from China and India. Traditionally, these two countries produced what they needed. But now their own rapid industrialization has turned the tables. They’ve switched from being exporters to importers of sulfuric acid.”

Read on to find the only “pure play” on sulfuric acid spot prices — a little-known company that’s one of the world’s largest suppliers of sulfuric acid.

This from Mike Burnick:

Brazil is far and away the global leader in ethanol production technology. In fact, the country began large-scale development of ethanol as an alternative fuel source amid the oil shock of the late 1970’s and early 80’s.

Today, ethanol accounts for 50% of Brazil’s total annual automotive fuel consumption. More than 70% of new cars sold in the country are flex-fuel capable. That means they’re able to run either on gasoline, ethanol, or some combination of the two.

Currently, Brazil is the world’s second-largest ethanol producer, and largest exporter, with total output of about six billion gallons a year.

The country has its sights set on becoming the dominant global exporter of ethanol by 2020. Brazil’s global ethanol exports could total as much as 200 billion gallons a year within that time – that’s over 30-times today’s ethanol production. Talk about a growing industry!

U.S. and Europe Just Can’t Compete with Brazilian Ethanol

Brazil enjoys a big advantage over other nations – as the world’s lowest cost ethanol producer. As shown in the graph above, Brazil can distill bio-fuels from sugar cane at a significant cost advantage to other nations.

Neither U.S. corn-based ethanol, nor wheat-based ethanol from Europe, can come close to matching the Brazilians on a production cost basis.

The sugarcane plant, which flourishes in Brazil’s tropical climate, produces a “yield” of 6,000 liters of ethanol per hectare of land. That’s about twice the yield of corn-based ethanol!

In fact, Brazilian ethanol is about 40% cheaper to make than in the U.S. – and costs less than half the price of European ethanol.

When Trade Tariffs Fall, Brazilian Ethanol Will Flow

Of course Washington, in their infinite wisdom, maintains silly trade tariffs equal to 54-cents a gallon on imported ethanol. This ridiculous trade barrier benefits a relatively small number of U.S. corn farmers at the expense of millions of American drivers.

In spite of this, Brazil’s largest ethanol export market remains the United States. In fact, Brazil shipped us more than 430 million gallons of ethanol last year – up fourfold from 2004! Wholesale gasoline prices in the U.S. are leaping above US$4 a gallon, and will keep spiraling higher as crude oil goes through the roof during what’s shaping up to be a long, hot summer.

Naturally, pressure is mounting for Congress to eliminate this silly, protectionist ethanol tariff. When that happens, the floodgates will open wide for much-cheaper Brazilian ethanol to flow freely into U.S. markets.

By leveraging the strength of its vast sugarcane growing region, and building on its already well-established ethanol producing technology, Brazil is perfectly positioned to benefit.

In fact, this emerging market tiger could easily become the Saudi Arabia of ethanol within the next decade. You heard it here first!

Hopefully, American protectionist trade tariffs are lifted soon… and when they are, Brazil’s ethanol expansion would quickly follow.

There’s also another crisis brewing at the moment – that’s becoming more painfully obvious with each passing day: A global energy crisis! In many ways, the two are closely connected…

U.S. corn-based ethanol production is a big reason why corn prices surged 56% higher in the past 12 months alone. About one-third of the entire U.S. corn crop is being diverted from kitchen tables to gas tanks.

As a result, people are rioting in poor countries around the world. They’re taking to the streets in protest over U.S. corn-based ethanol. They complain bitterly that we are trading THEIR food for OUR fuel. But there is a better way…

In fact, there is an “emerging” alternative bio-fuel source that is a lot more efficient than corn-based ethanol, and doesn’t require the same food vs. fuel trade-off.

In fact, Brazil is leading the great fuel revolution – with sugar cane-based ethanol…

Brazil’s Big Ethanol Advantage

Brazil is far and away the global leader in ethanol production technology. In fact, the country began large-scale development of ethanol as an alternative fuel source amid the oil shock of the late 1970’s and early 80’s.

Today, ethanol accounts for 50% of Brazil’s total annual automotive fuel consumption. More than 70% of new cars sold in the country are flex-fuel capable. That means they’re able to run either on gasoline, ethanol, or some combination of the two.

Currently, Brazil is the world’s second-largest ethanol producer, and largest exporter, with total output of about six billion gallons a year.

The country has its sights set on becoming the dominant global exporter of ethanol by 2020. Brazil’s global ethanol exports could total as much as 200 billion gallons a year within that time – that’s over 30-times today’s ethanol production. Talk about a growing industry!

U.S. and Europe Just Can’t Compete with Brazilian Ethanol

Brazil enjoys a big advantage over other nations – as the world’s lowest cost ethanol producer. As shown in the graph above, Brazil can distill bio-fuels from sugar cane at a significant cost advantage to other nations.

Neither U.S. corn-based ethanol, nor wheat-based ethanol from Europe, can come close to matching the Brazilians on a production cost basis.

The sugarcane plant, which flourishes in Brazil’s tropical climate, produces a “yield” of 6,000 liters of ethanol per hectare of land. That’s about twice the yield of corn-based ethanol!

In fact, Brazilian ethanol is about 40% cheaper to make than in the U.S. – and costs less than half the price of European ethanol.

When Trade Tariffs Fall, Brazilian Ethanol Will Flow

Of course Washington, in their infinite wisdom, maintains silly trade tariffs equal to 54-cents a gallon on imported ethanol. This ridiculous trade barrier benefits a relatively small number of U.S. corn farmers at the expense of millions of American drivers.

In spite of this, Brazil’s largest ethanol export market remains the United States. In fact, Brazil shipped us more than 430 million gallons of ethanol last year – up fourfold from 2004! Wholesale gasoline prices in the U.S. are leaping above US$4 a gallon, and will keep spiraling higher as crude oil goes through the roof during what’s shaping up to be a long, hot summer.

Naturally, pressure is mounting for Congress to eliminate this silly, protectionist ethanol tariff. When that happens, the floodgates will open wide for much-cheaper Brazilian ethanol to flow freely into U.S. markets.

By leveraging the strength of its vast sugarcane growing region, and building on its already well-established ethanol producing technology, Brazil is perfectly positioned to benefit.

In fact, this emerging market tiger could easily become the Saudi Arabia of ethanol within the next decade. You heard it here first!

MIKE BURNICK, Senior Editor & Global Markets Analyst

P.S. Want to know more about the great fuel revolution – including the alternatives that may be running your car within the next 10 years? Click here to read my FREE special report to get all the details.

Source: Put This Emerging Market Tiger in Your Tank!

A few days later, I read about Mosaic, a fertilizer company – about how the rising cost of sulfuric acid could impact its profit margins. Then last week, I came across a piece about how the cost of treating water is “going through the roof.” The main culprit is, once again, the rising price of sulfuric acid.

As one water utility rep said: “As sulfuric acid prices increase, so do the products that contain this ingredient. The U.S. has also seen a shortage in supply of sulfuric acid. The U.S. has imported the majority of sulfuric acid from China in the past, but recently, China has slowed the trade of sulfuric acid to the U.S. because its own demand is greater than what China can produce for both the U.S. and itself.” In short, demand is swamping supply. Sulfuric acid prices in March hit a record high of $329 per ton, according to Purchasingdata.com, after trading at $90 per ton as recently as October. Sulfuric acid shortages?

Hmmm… Well, time to take a look at this, think I.

“Sulfuric acid is one of those unheralded lubricants that keep the gears of the industrial economy spinning,” says Chemical and Engineering News. “Although less in the limelight than petrochemicals such as ethylene or polyethylene, it is, in fact, the largest-volume chemical in the world.”

We use sulfuric acid in mining to extract copper, nickel and uranium. We use it in steel production and in making fertilizers. We use it to refine oil and to treat wastewater. It goes into the plastics we make, and a bunch of other things. The biofuel boom has kicked off a big increase in the demand for sulfuric acid. In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a doublewhammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000 4,000 tons of sulfuric acid per year.

Then there is that great demand pull from China and India. Traditionally, these two countries produced what they needed. But now their own rapid industrialization has turned the tables. They’ve switched from being exporters to importers of sulfuric acid.

The boom in metals such as copper and nickel also drives the demand for sulfuric acid. Smelting operations typically throw off sulfuric acid as a byproduct. But even here, metals companies need more than they can produce.

Supply is also tight. As with many commodities, there was a long period when sulfuric acid prices went nowhere. This led to a decrease in production facilities. I found one example of a closure as late as November 2006, when GenTek shut down a sulfuric acid facility due to “adverse market conditions.”

There also seems to be little new capacity on tap. Industrial Info Resources, in Sugar Land, Texas, tracks this sort of thing. According to IIR, of the $89 million invested in sulfuric projects in the U.S. in 2007, most of the funds went toward planned maintenance, rather than expanded capacity. It also turns out that not only is supply tight, but there are all kinds of transportation bottlenecks in delivery – such as a shortage of rail cars. Key Compton, president of a sulfuric acid producer in Texas, said toward the end of last year that customers soon “may be paying prices for sulfuric acid that they’ve never seen before.”

So how can you play it? Well, there are a number of producers of sulfuric acid. Most are big chemical companies that you wouldn’t own because you want exposure to sulfuric acid. Owning them is like buying Home Depot because you think it sells a great lawn mower. The only “pure play” on the idea I could find is a little company called Chemtrade Logistics in Canada, one of the world’s largest suppliers of sulfuric acid. It trades in Toronto under the ticker symbol CHE. You can find a quote on Yahoo using CHE-UN.TO.

It’s a Canadian income trust and pays a monthly distribution of about 10 cents. Based on a price of $11.44, that’s a yield of 10.5%. The company appears to be in good financial condition and throws off a lot of cash flow, much of which investors pocket in the distribution. It’s not a sexy business, but it looks like an interesting play on what seems to be at least a temporary scarcity of a key chemical. Chemtrade is not a one-trick pony. It also produces liquid sulfur dioxide and sodium hydrosulfite. The company also sells into a wide range of end markets, so you’re not tied to the fortunes of any single sector. The company has an excellent presentation of its business, complete with slides, on its Web site.

Since I have not completed my research on either Chemtrade or the overall sulfuric acid industry, I do not recommend Chemtrade. But since this sector is red-hot at the moment and appealing on many levels, I decided to share the insights I’ve gleaned so far. I plan to do more research on the idea. I would advise all investors do the same.

Chris Mayer
for The Daily Reckoning Australia

P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Source: Skyrocketing Costs of Sulfuric Acid

Sulfuric acid is used in mining to extract copper, nickel and uranium. It is also used in steel manufacturing, fertilizer production and oil refining.

“What’s really kicked off demand for this chemical, however,” according to Chris Mayer in The Daily Reckoning, “is the surge in ethanol production — a double whammy for sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000-4,000 tons of sulfuric acid per year.”

Chris says, “Sulfuric acid spot prices in March hit a record high of $329/ton, according to Purchasingdata.com, after trading at $90/ton as recently as October..”

Read on to find the only “pure play” on sulphuric acid spot prices — a little-known company that’s one of the world’s largest suppliers of sulfuric acid.

Of course this is NO news flash to regular readers of the A-Letter. My colleagues and I have been talking about skyrocketing agricultural commodity prices for months now. In fact, our investment director Eric Roseman dedicated a whole series of articles to the global food crisis just last week. If you missed them, you owe it to your portfolio to catch up. You can review Eric’s comments from last Wednesday, Thursday and Friday right now.

Your Food Prices Leap 83% in Three Short Years

According to data from the World Bank “Surging commodity prices have pushed global food prices up 83% in the past three years.”

Officials singled out U.S. corn-based ethanol production and other bio-fuels as a contributing factor to the rise in food prices. Corn prices have soared 56% in the past 12 months alone. About 30% of the entire U.S. crop is being diverted from kitchen tables to ethanol production.

But there’s another crisis looming too, in case the IMF hasn’t noticed…a global energy crisis! With conventional energy prices soaring, it’s no surprise that more money is being diverted into alternative energy, including bio-fuel.

Crude oil has skyrocketed over 400% since 2001 – topping US$112 a barrel last week. Coal, once considered a cheap and abundant source of energy, is now running in short supply as well. The cost of coal has soared nearly 60% this year – to US$63 per ton – and has doubled since July 2003.

So in addition to a global food crisis, the IMF should add the global energy crisis to its list of things to “officially” worry about.

One thing is crystal clear, with fossil fuel prices skyrocketing as supply continues to fall short of rising global demand, alternative energy sources are back in the spotlight and here to stay. These alternatives are more cost effective solutions to the energy crisis than ever before.

Alternative Energy is a Fast Growing Market

The market for alternative energy – including solar, wind, bio-fuels and fuel cells power – grew a whopping 40% last year alone! Alternative energy grew into a US$77 billion industry by the end of 2007, according to industry data from Clean Edge.

But that’s just the tip of the iceberg. The alternative energy sector is set to explode into a US$255 billion market within the next 10 years! The data supporting this miraculous growth is simply staggering. For instance:

• Global production of bio-fuels will grow to US$81 billion within the next 10-years, up from US$25.4 billion last year.
• Spending on solar power generation will expand from US$20.3 billion in 2007 – to US$74 billion by 2017.
• Wind power is projected to grow to US$83.4 billion over the next 10 years, up from US$30 billion in 2007.

Solar and wind power have both enjoyed phenomenal 30% compound annual growth rates over the past 10 years. That growth is set to accelerate in the future as both of these alternative energy sources go mainstream.

The commercial costs of solar and wind power are falling rapidly, making these clean energy sources more cost effective than ever before. In fact, with the soaring cost of fossil fuels, solar and wind power technologies are even cheaper than conventional energy sources in some applications.

Last year global wind power installations reached a record 20,000 megawatts (MW), of power generating capacity. That’s equivalent to the output of 20 conventional coal-fired power plants.

Advances in solar-power technology are bringing costs per megawatt down considerably. As a result, spending on solar photovoltaic systems exceeded US$20 billion in 2007. Obviously, this alternative energy technology has a very bright future.

Almost 800 cities in the U.S. alone have pledged to meet Kyoto targets for reducing greenhouse gas emissions through a greater commitment to renewable energy resources. The European Union has even more ambitious targets.

Emerging Asia is in desperate need of new power generating capacity. Rising fossil fuel costs are putting the squeeze on countries such as China and Japan, leading to more alternative energy investment sources.

Smart Money Pours into Alternative Energy

The huge growth potential offered by the expanding alternative energy sector has notgone unnoticed by well-heeled investors either.

In fact, some of the very same smart-money investors who were early to profit from the 1990’s technology boom - namely savvy venture capitalists – are now just beginning to pour billions into clean energy technology. Investment in the alternative energy sector surged 60% last year to US$148 billion in 2007.

Once again, this is just scratching the surface of the true investment potential in alternative energy today. In fact, the International Energy Agency estimates that “US$16 trillion needs to be invested by 2030 (or about US$600 billion per year) to meet the growth in projected demand for new electricity and fuel sources worldwide.”

You can bet that an increasing share of this spending will find its way into promising alternative energy technologies.

The Best Way to Invest in Alternative Energy

Alternative energy covers a lot of ground. It includes everything from ethanol to solar energy, wind to hydro-electric power. Even fuel cells and high-yield battery technologies are included in the alternative energy sector. That’s why it’s so difficult to choose specific sub-sectors to target – let alone pick the best stocks.

Perhaps one of the easiest ways to invest in the vast growth potential in alternative energy is by making a broad, sector-wide investment. There are a number of exchange traded funds that offer instant diversification among dozens of profitable companies in just one single investment.

I recently recommended one such ETF to my Global Market Investor subscribers. This ETF holds 30 leading alternative energy firms from all over the world. In fact, 65% of the stocks in this fund are listed outside the United States. This gives you the added bonus of diversifying your investment outside the falling buck and slumping U.S. stock markets.

The bottom line here is that growth in alternative energy is an undeniable long-term trend. In fact, this industry hasn’t even scratched the surface of its long-run growth potential, which means this is still a great time to buy.

MIKE BURNICK, Senior Editor & Global Markets Analyst

EDITOR’S NOTE: With ETFs, you truly have the holy grail of offshore investments right here at home. You can diversify in far off regions like Japan, Taiwan, Brazil and Singapore, and still invest right on the NYSE, with your regular stock brokerage account. This May 14 -17, Mike will introduce you to the most exciting ETFs on the planet at our Total Wealth Symposium in Panama. It’s not just ETFs. Mike will be joined by over a dozen investment experts from around the world. These experts will give you their favorite options, currencies, commodities and funds to beat the credit crunch in 2008 and beyond. Still interested in joining us this year? Seats are filling up. So please click here to reserve your seat before we sell out.