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

The first episode, dating to my childhood, came a few years after OPEC flexed its muscles in the 1973 oil embargo. The Saudis and others started using their petrodollars to buy up U.S. assets here and there, generating a fair degree of Arab-bashing at the time. It even served as fodder for the rants of the fictional anchorman Howard Beale in Network — a great movie in its own right, and an excellent moment-in-time capturing the zeitgeist of helplessness in post-Vietnam, post-Watergate America. A few years later, OPEC lost all its pricing power as oil was back to nearly $10 a barrel and the storm passed.

The second episode came in the 80s, when Japanese investors started snapping up U.S. commercial real estate, including Rockefeller Center. Time magazine, still sort of relevant in that pre-Internet era, captured the moment with a quote from freshman Senator Joe Lieberman (one must imagine him saying this in his voice for the full effect): “This year when they turn on the lights of that Christmas tree in Rockefeller Center, we Americans are going to have to come to grips with the reality that this great national celebration is actually occurring on Japanese property.” The following year, Japan entered its recession-in-perpetuity and Rockefeller Center was back in U.S. hands by 1995.

This time the “assault” is coming not from Arabs, not from the Japanese… but from everyone. And that’s what could make the backlash so ugly. America against the world.

Look at just the last two days: Arabs buying the Chrysler Building (never mind that it was already owned by the German subsidiary of an Atlanta-based fund, making its American provenance rather dubious to begin with), and today Europeans are bidding for Budweiser maker Anheuser-Busch. The outraged flag-waving is underway.

Americans will not want to hear that all this is their own fault, borrowing and spending on both a personal and governmental level to a point where they can’t help but be in hock to the rest of the world, while the rest of the world seeks real assets to take the place of its increasingly-worthless dollars.

So not only are we heading for a financial storm and an energy storm, but also very likely a storm of ugly jingoism that will only accentuate and accelerate America’s pariah-state status. The phenomena might very well feed on each other. (And depending on when it reaches critical mass, it could even prove a decisive factor in the presidential election.) Soon the rest of the world could be as repulsed by the American people as it is by the U.S. government — as our Founders weep in their graves for the Republic that’s been lost.

Update: While not exactly a case of “furriners” buying up “Merkin” assets, this is definitely in the same vein — a growing legend that the dastardly Chinese are drilling for oil off Cuba, despite not a drop of evidence to back it up. Memo to Dick Cheney and everyone else peddling this nonsense: If you stopped sucking up to the Cuba Lobby and recognize that if the embargo hasn’t worked by now it never will, your friends at Big Oil might be drilling those reserves right now.

Source: Xenophobia Redux