This week, IMF officials voiced strong concerns over current biofuels policies in the US and Europe. On Friday, the head of the IMF claimed that biofuels posed nothing short of a moral problem for the West, and that he would support a moratorium on biofuels made from foodstuffs. Also on Friday, the IMF’s Chief Economist called biofuels “a new form of protectionism” that is “now front and center in global geopolitics.” For anyone who’s been reading the news over the past month, you can’t help but agree with this assessment. With food prices now rising in real terms for the first time in 30 years, humanity faces something it has never experienced in its history: global tightness in food supplies. Under such a scenario, producer nations shut their borders to export to shield their populations from steep agflation, wealthy closed economies like Venezuela or Russia fix prices for foodstuffs and subsidize the difference, and the poorest of the poor get zip. For as long as I have written for this site, I have always claimed that this would be the single largest problem facing corn ethanol in the US – much more so than industry-specific concerns like oversupply. While the current administration can be expected to dig its heels in on this issue, pressure over the past two years has only been increasing and I am doubtful that, in the current context global food shortages and the lack of evidence that ethanol does anything at all to reduce foreign oil dependency, the US and European biofulel industries can expect enduring support from their politicians. The deal they have been getting is much too good to be true, and I expect reality will set in sooner rather than later. On Tuesday, Ted Nace at Grist told us about the education of Warren Buffett. Interesting piece on how MidAmerican, a Berkshire Hathaway company, abandoned plans to build a number of coal plants. While Buffett typically adopts a hands-off approach with his managers, he does get involved in important capital spending decisions, so you can rest assured he had a say in this. Now for anyone who has been following what’s been happening with coal power in the US, it’s not exactly true to this decision went unnoticed at the time. Moreover, while Buffett does not have a track record of making high-profile pronouncements on the environment, MidAmerican has built a significant portfolio of wind generation assets and, again, you can bet the Oracle had a hand in making this happen. Were these decisions made because Buffett has suddenly turned environmentalist? Not a chance! Am I happy that the greatest visionary in US capitalism is seeing green in green? You bet!! On Tuesday, the WJS’s Environmental Capital about the latest large oil producer to throw the peak production towel. The May edition of Bloomberg Markets also featured an interesting article discussing declining production at Pemex, the Mexican oil giant (unfortunately this article isn’t available free of charge). In both cases, it probably doesn’t help that federal authorities have done everything in their power to discourage foreign investment. Nevertheless, given the opacity surrounding the state of global oil reserves generally, these tidbits of info can’t help but lend further credence to the peak oil theory. On Thursday, Chris Baltimore at Reuters told us about a certain billionaire Texas oil man who is making big bets on wind. Projects of this magnitude will do wonders for the economics of the sector by helping prices come down. I also like the idea of a north-south wind corridor and an east-west solar corridor. I’m not sure, however, that natural gas will ever power a significant portion of cars. It would appear illogical to me to switch out of a non-renewable fuel source at great costs to replace it with another. On Thursday, Jim Fraser at the Energy Blog informed us that Trina Solar had canceled a $1 billion polysilicon plant. The reason? The poly supply shortage is easing and Trina can sourse all that it needs in the market place. Polysillicon has been the main enemy of margins in the solar PV industry over the past couple of years. Could it be time to start looking at some of the solar stocks that were particularly exposed to this?
You’re right to point to the importance of looking at silicon when evaluating solar. The silicon shortage was looking very scary for a while, but with it easing up one of the main curbs for growth is starting to look less and less like a problem.