The Way I See It

Who knows what the future will hold?
By Mike Bryan | August 01, 2006
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THE END IS NEAR! That's the word on the street now by some stock analysts about ethanol. Two years ago, many didn't know how to spell ethanol. Now, as newly educated industry experts, they are predicting the rapid demise of profits and the peak of the industry.

There are several important points to be made here. Renewable fuels have reached critical mass. The Americas are the OPEC of renewable energy, with the Midwest being Saudi Arabia. The world will never again rely on a single source of liquid energy as it has for the past 100-plus years.

Having said that, I think it is also important to understand that margins will change in the ethanol industry. Profits will likely shrink from what they are today. That's what industries do as they mature. For those getting in for a fast buck, they might want to rethink their strategy. For those who are looking for an investment in our energy future in an industry that has about as solid a future as one could imagine, there are a lot of opportunities.

The frenzy of today will not last, it can't last, and frankly it shouldn't last. In my opening remarks at the International Fuel Ethanol Workshop & Expo last month in Milwaukee, I said, "All we need to do is look at the history of the oil industry a hundred years ago. At the turn of the century, the oil industry was experiencing uncontrolled growth, money pouring in from investors around the world and companies scrambling to build refining capacity as quickly as possible."

This correlation is important because a new energy industry is being born. There are those who say we can never replace oil; I believe renewable fuels can replace a major portion of the fossil fuel used in the world today. Imagine a hundred years from now, just like those in the oil industry might have tried to imagine a hundred years ago. From this snapshot in time, it is difficult—if not impossible—to grasp the ultimate potential for renewable fuels.

New technology, new feedstocks, less energy use and greater market opportunities will create a new energy future. Now it's a race, I suppose much like the oil barons experienced in years past. It's a race to build as many plants as quickly as possible. If you believe in the future of this industry, the race will evolve into a long-term opportunity. So let's not focus so much on next year or even the next 10 years. Let's look at the next hundred years and imagine.

Have a great month!