Morning Brew: February 22nd

Did The Province publish your letter, Sean? One of my proudest achievements in life was getting them to publish a letter I wrote about Lorne Mayencourt's stupid aggressive begging act. A total waste of time, of course, but it made me feel a lot better. And then I decided to stop reading the Province to prevent my entire body being consumed by bile.

I had one published once, it was about street racing and how hypocritical they were being by demanding an 'end to the madness' when half of their paper is one giant car ad.

Campbell's Investments are held in a blind Trust. Blind means that he makes no decisions regarding the strategy implemented by the advisor. Say what you will about Campbell, but this story is a perfect example of populist pandering in politics, taking advantage of the lack of knowledge that the general public has regarding sophisticated investment trust structures. There is no story here. As for it being "evil" to invest in O&G, more Canadians should own the resources that exist in this country. We dangerously undervalue our own worth, as most recently witnessed in the sale of INCO to Xstrata, at olny 9 times earnings! 9 TIMES EARNINGS. We are talking about an asset that is akin to the Mona Lisa, it is one of a kind and once it's gone, you never get it back. The world is short of Nickel and Copper, and remaining deposits are extremely expensive to access.

Canada has the second (only to Saudi Arabia whose numbers are not publsihed publicly)largest reserves of crude left in the world. We will lose control of them if we do not own them. How do we own them? No children, not by having the government privatise them, we own them by investing in them in our stock markets.

So, good for Campbell, being a patriotic Canadian without even knowing it.

The Campbell article raises some interesting points that I just have to write about. Like everyone, I have a lot of two-bit opinions about everything, and like everyone I have a narrow range of expert knowledge related to my education and proffession. One area where I can claim expert knowledge is in the energy markets (since that is how I have been making my living for the last 6 years). The current social trend of "greening" is an intereseting one in that as with all populist trends fact tends to be squeezed out by emotion (My points have nothing to do with whether or not global warming is real, surely it is). Take the current interest in using ethanol to replace fossil fuels as distillate. Ethanol is promoted as "green" fuel in that it is derived from renewable plant sources. Brazil is often cited as the example to follow, where somehting like 20% of all distillate sold is made up of ethanol produced from sugar cane. The US senate is currently following the populist trend and enacting legislation to ecourage domestic production of ethanol for use in US distillates, similar to Brazil. US ethanol is produced from corn, in Brazil ethanol is produced from sugar cane. As I type this distillate fuel is selling for $1.75/gallon on the US spot markets. Ethanol, per gallon costs less in Brazil than distillate so it makes sense to produce it for fuel. Their market is also geographically small enough and demand is also small enough to keep prices in check. They also have "benefited" from a lack of a labour movement which has kept wages low. They have also benefit from lack of environmental laws which has allowed huge patches of rain forest to be mowed down so that sugar cane can be grown. They also have a reserve of land, so that if demand increases (domestic or sell to foreign interests) they can chop down more rain forest to grow more cane. Sugar cane grows so well in brazil that they manage to produce three crops a year, that's a lot of wear and tear on the top soil.

In the US ethanol is produced from corn, on land that has just about reached it's maximum carrying capacity. Corn can only produce one crop a year. To grow more corn for ethanol, land must be taken from growing other food crops. US land is expensive and so is the labour. The end result is that ethanol produced in the US costs about $2.50/gallon. With increasing demand the US will run out of ethanol producing capacity fairly quickly and will have to import ethanol on large ships which will burn distillates for fuel.

When trying to evaluate whether a fuel is green or not, it is necessary to calculate total costs. Ethanol works in Brazil, at a great cost to the environment and to their labour force. Ethanol production in the US is clearly unfeasable, but the current hot button issue of greening makes it a quick way for short sighted politicians to gain voters loyalties.

Although not a detailed analysis my basic points made above apply to many "green" fuels, including Bio Fuels and Hydrogen as fuel. Cost by cost analyses are necessary to reveal the true utility of any fuel source.

It is easy to conclude that we are screwed as a planet, since there are no really easy substitutes for our ever growing need for energy. The current bottom line is that fossil fuels are the most effecient source of energy that we have, and that is why we continue to use them.

Without having to go through each energy source and weighing the options there are two sources which offer real promise. The first is nuclear energy, which scares the hell out of everyone, but it is truly cost effective in an energy out for resources put in analyis. The best technology is SOLAR, clean and efficient by any alysis, and is perhaps the greatest hope. (wind is good but suffers from a similar problem to hydro, inefficiency due to power loss over distance transmitted - but that's another issue)

Beware the hype! ...it may offer sweet fast relief, but the small print is very small indeed.

I really should be doing other things...

http://www.msnbc.msn.com/id/17251571

"Without having to go through each energy source and weighing the options there are two sources which offer real promise." Hey, here's a crazy idea: don't use as much energy!

I agree about ethanol and hydrogen, and I don't know anywhere near what you know, but aren't they also net energy losers? doesn't it take more energy to make both fuels than they offer?

There is no amount of alternative energy to sustain our way of life. Carbon taxes are a reactionary, band aid solution. The real problem lies in our economy, because it would fail if we stopped consuming. But we invented it, its not like its based on reality, so why can't we change it?

http://adbusters.org/metas/eco/truecosteconomics/

On the lighter side, those radiozero guys have kept me entertained. Thanks for the link!