I'm looking for in ethanol creditability. If any major oil company or refiner makes an acquisition into ethanol.
You bring up an interesting issue.
It seems to me that at this moment Oil companies have conflicted interests regarding ethanol. If Exxon, for instance, were to issue a press release tonight announcing major investments into the ethanol business they would, virtually overnight, substantially reduce the assets of their oil reserves.
Also, ethanol production is a very different animal from oil production. In the oil business, the big companies pretty much have the entire process under their control. From exploration, drilling, transportation, refineries and gas stations they pretty much own or influence the whole enchilada.
Ethanol production represents a completely different dilemma for them. Anybody can grow corn, almost anybody can create an ethanol refinery, pipelines can not be used to transport ethanol and negates the oil monopoly on that mode of transportation.
If Exxon wants the same control over ethanol they have now over oil they'd have to buy huge tracts of farm land(the new oil wells), grow the corn (or biomass), create the refineries (which would be the easy for them) and then ship it at the same costs that everybody else would incur. Also, because of the ethanol transportation issue ethanol producers will likely need many regional refineries to supply local economies.
I just don't see the Exxon company going into the farming business any time soon.
On the other hand, if ethanol is the future, I agree they'd be idiots not to begin the conversion into ethanol-related production in some manner, but how?
Not all oil companies are the same. It's my understanding that BP is seriously looking at alternative fuels and that Shell has a research in works for producing cellulose ethanol.
I don't automatically discount the idea that oil companies will be getting into ethanol at some point. They have the distribution facilities (gas stations) and their buying power is enormous.
However, for the moment, ADM is the single best bet for ethanol. They are the largest producer, are diversified in the agricultural aspects of the business, and have a righteously sized pocket book of their own.
I wonder if ADM is seeking to make a deal with one of the big oils. Might explain why their new CEO hails from the oil biz. Given her background I don't think her appointment to ADM is pure coincidence. |
