In their search for explanations as to why oil has surged past $130 per barrel, Washington, Wall Street and the financial media are as clueless as cavemen after a freak summer snowstorm. Despite the head scratching, the blame game is nevertheless in full force.

Speculators and big oil companies are being trotted out as scapegoats, and increased margin requirements and taxes on windfall profits and futures trading have been mentioned as appropriate sanctions. It should be clear that this is pure farce, and that no one understands what is actually happening.

The reality is that after years of reckless consumption and dollar debasement, Americans are now being priced out of the very markets over which they formerly held unchallenged title. As more affluent foreigners consume more of the resources and products they previously exported to us, Americans are being forced to cut back. The rising dollar-based price of gasoline is simply an illustration of this global trend.

Poorly concealed behind contrived government statistics, the signs of America’s falling standard of living are everywhere; all one has to do is look. We are unloading our SUVs for less-desirable compacts, and are paying more to fly on crowded planes (where we pay to check luggage and dine only on what we bring onboard). We now buy our lattes from McDonald’s Corp. (MCD) or not at all, and we increasingly forego dining out, trips to the mall and vacations – just so we can scrape together enough to fill our gas tanks and kitchen pantries, pay taxes and insurance, or make credit card, mortgage or car payments.

The collective belt tightening is simply the down payment on the U.S. government’s massive bailout of Wall Street investment banks and mortgage lenders. As the U.S. Federal Reserve creates money to buy bad mortgages and other shaky securities held by banks and brokerage firms, the value of the savings and wages of everyone on Main Street will continue to fall. As a result, the costs of products previously taken for granted have begun to bite.

The various housing bills and stimulus packages now passing through Congress will add significantly to the staggering final price tag. In the end, the “free lunch” currently being dished out by Washington will be the most expensive meal ever served. The cost will be borne by ordinary Americans citizens every time they open their wallets. And four-dollar gasoline is just the beginning.

For all the talk of increased global demand, few seem to understand from where it actually comes. The surge in global demand is both a function of the increased purchasing power of foreign currencies and the fact that foreigners are choosing to spend more of their incomes themselves.

In other words, former Fed Chairman Alan Greenspan’s famous “global savings glut” is turning into a global consumption binge, with Americans unable to crash the party. This trend will only get worse as the dollar-denominated price of just about everything that is either imported, or capable of being exported, goes through the roof.

We can look for scapegoats all we want but the simple fact is Americans are going to have to get used to a much lower standard of living. Those who have been putting all the food on our tables are finally pulling up chairs and are serving themselves.

Source: That Pain You Feel at the Pump is From a Dollar Crisis, Not an Oil Crisis

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!