Don't sign a contract in which the value of the thing you're buying or selling is determined by the value of something else - unless you're confident you know what that value of something else will be! We've recently seen a huge divergence in natural gas prices in N America versus those in Europe. This has happened in part because of the huge expansion in supply in N America and Russian control on gas supply to Europe. But forward contracts for Russian gas have been agreed based on the price of oil, which has not tracked gas. Europeans seem locked in to paying too much for gas over the next several years.
Forecasting demand for energy is difficult too. US policies have tied demand for ethanol to demand for gasoline. US demand for gasoline has been declining, reducing demand for ethanol to blend with gasoline. Also, demand for higher-ethanol blends has not materialized. The ethanol industry, and the rural communities that are dependent on it, is facing tough times now. Will the US change policies to prop up bio-ethanol? (read more here) Personally, I think the best bet is to make modest investments in "next generation" ethanol and identify niche markets most appropriate for ethanol, but focus most of our energy investment on items with a much greater energy return on investment.
No comments:
Post a Comment