U.S., Brazil plan ethanol partnership

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ADM and Cargill ridin' the ethanol bandwagon for all its worth...

Ethanol giant ADM is bullish on fuel’s future
Sun., March. 2, 2008 - Company will stand fast as experts see volatile next 10 years for market

On a conference call back in early November, Archer Daniels Midland Chief Executive Patricia Woertz sounded like an ethanol bull on the prowl for a bargain. With ethanol supply outstripping demand and its price falling, an analyst asked her if ADM, one of the world's ethanol's top producers, was on the lookout for failing competitors' plants it could buy up cheap. "We're actively engaged in this market all the time, and we know where every plant location is," Woertz said. "But it would have to be a real value and scale and fit with our network."

A few weeks later, ethanol rival VeraSun Energy Corp. pulled the trigger on a $686 million buyout of US BioEnergy Corp. that, when it closes next month, will make VeraSun the top ethanol producer in the country. ADM is still waiting — a decision experts say underscores the uncertainty of an industry struggling with a supply glut and a decision by the government to cap just how much it will contribute to ethanol producers who make their product from corn. The crop is the primary source for American ethanol.

"It was tough a couple of years ago to not make money producing ethanol; now it's a lot easier to not make money," said Pat Westhoff, an agricultural economist at the University of Missouri. "We expect there to be a lot of volatility in returns to ethanol producers over the next 10 years." Just this week, Cargill Inc., another big ethanol maker, suspended plans for a $200 million ethanol plant near Topeka, Kan., because of poor market conditions. Both ADM and Cargill, unlike almost all their competitors, are diversified enough to wait out the uncertain market.

More Ethanol giant ADM is bullish on fuel?s future - Oil & energy - MSNBC.com

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Doubt if it will happen...

Only deep recession will end high oil prices
Saturday 22nd March, 2008 - Only a deep global recession leading to a slowdown in the Asian markets can end high oil prices, according to a new report.

'What needs to happen to bring about a significant weakening in the oil prices is a recession in key oil-consuming economies, a slowing up of the Chinese economy, more non-OPEC (Organization of Petroleum Exporting Countries) supplies and an acknowledgement by Saudi Arabia that the oil market should be supplied with more oil,' according to the monthly report of the London-based Centre for Global Energy Studies (CGES).

It said OPEC appeared to be determined to follow a high-price policy, keeping a tight rein on production.

Although the world needs more oil supplies from the OPEC countries, there is no sign they were willing to supply it, the CGES report stated.

Only deep recession will end high oil prices

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Cheney in Saudi Arabia for oil talks
Saturday 22nd March, 2008 - US Vice-President **** Cheney, currently in Saudi Arabia, has spoken to King Abdullah and Saudi oil minister Ali al-Nuaimi about the instability in the oil market.

Saudi Arabia is the world's biggest oil producer and the only OPEC member with the capability to bring large quantities of extra oil onto the market. This year alone, the price of oil has risen by 16 percent to over 100 dollars a barrel.

No further details of the Saudi Arabia talks were released, but Mr Cheney, who is on a nine-day tour of the Middle East, will have further discussions while he is in the country.

He has already visited Iraq, Afghanistan and Oman and will travel on to Israel, the West Bank and Turkey.

Cheney in Saudi Arabia for oil talks

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Nothing left to eat?...

Food supplies threatened by biofuels
Sunday 23rd March, 2008 - The head of Nestle, the world's biggest food and beverage company, has sent out a warning against biofuels.

The chairman and chief executive of the company, Peter Brabeck-Letmathewarns, has said that growing use of crops such as wheat and corn to make biofuels is putting world food supplies in jeopardy.

He told the Swiss newspaper NZZ am Sonntag: "If as predicted we look to use biofuels to satisfy 20 per cent of the growing demand for oil products, there will be nothing left to eat." He said the current subsidies being handed out to biofuel makers were unnacceptable while the price of maize, soya and wheat was being driven higher.

He said land for cultivation and water sources were under threat. Countries which manufacture biofuels, such fuels, such as Brazil and Colombia, have recently been at pains to discourage such comments.

Food supplies threatened by biofuels

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Next Oil Giant? Billons of Barrels in Brazil...

Brazil Oil Field Could Be Huge Find
April 14, 2008 - Discovery Might Have 33 Billion Barrels, Making it the World's Third Largest Oil Reserve

A deep-water exploration area off Brazil's coast could contain as much as 33 billion barrels of oil, the head of Brazil's National Petroleum Agency said Monday. That would make it the world's third-largest known oil reserve. Haroldo Lima cautioned that his information on the field off the coast of Rio de Janeiro is unofficial and needs to be confirmed.

The state-run Petrobras oil company declined comment on what would be the planet's largest oil find in decades, and its shares moved wildly in positive territory after Lima made the comments. By early afternoon, the company's American depository shares were up 8.5 percent in New York, or US$9.54 (euro6.01) to US$122.39 (euro77.13).

Lima told reporters that Petrobras "may have discovered a huge petroleum field that could contain reserves large as 33 billion barrels," amounting to the world's third-largest reserve, according to his spokesman, Luiz Fernando Manso.

If true, the oil in the Carioca exploration area would be five times larger than the Tupi oil field, whose estimated reserves of 8 billion barrels were announced by Petroleo Brasileiro SA in November. Petrobras also announced a blockbuster find of natural gas in February in an Atlantic Ocean field nicknamed Jupiter.

More ABC News: Next Oil Giant? Billons of Barrels in Brazil

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Crude Jumps Above $111 As Dollar Weakens
April 14, 2008 - Crude oil prices jumped back above $111 a barrel in New York after the news spread that the supplies could be disrupted from the U.S. and Nigeria.

Additional boost to the prices came from the weakening of the U.S. dollar in the global markets as the speculations on the condition of corporate earnings reports indicate that the U.S. economic prospects have worsened. There have been a rising concern over the state of the U.S. economy as the Group of Seven finance ministers expressed fears over the global economic prospects that have weakened by the losses incurred in the financial sector.

A light sweet barrel of crude oil for May delivery traded at $111.16 a barrel, up by $1.02 in electronic trading on the New York Mercantile Exchange, after it was recorded at $110.14 a barrel on the New York Mercantile Exchange on Friday. Meanwhile, the weakening U.S. dollar also added to the rise of crude oil in the global markets.

"Traders have bought oil in response to lower interest rates and a weaker dollar," Cameron Hanover analyst Peter Beutel, told Thomson Financial news agency. "The disconnect between the bearish implications of a weaker economy and the price, which has gained to a large extent on the back of the anticipated Federal Reserve reaction to that growing economic weakness, has grown and is growing."

Crude had jumped to a record price of $112.21 a barrel on April 9 in New York, following a report from the U.S. authorities on the declining amount of oil stockpiles. Over the period of one year, prices of crude oil have gone up by 74 percent.

More Crude Jumps Above $111 As Dollar Weakens | April 14, 2008 | AHN

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Big ol' oil find in Brazil...

Enormous oil field located in Brazil
Tuesday 15th April, 2008 - The third biggest field in the world may have been discovered in Brazil with immense reserves calculated at 33 billion barrels of oil.

The offshore oil field has been located off the southwest coast near another field called Tupi.

Petrobras, Brazil's state-run oil company, has declined to comment, but oil analysts say it is the biggest discovery in the last 30 years.

The Tupi find has already been hailed as having the potential to propel Brazil into the same league as OPEC nations.

Enormous oil field located in Brazil

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Brazil's oil snafu - much ado about something big
Tue Apr 15, 2008 - Brazil's oil market regulator may have jumped the gun by providing a huge new oil reserve estimate with little data to back it up, but analysts have little doubt about the country's oil potential measured in billions of barrels.

Just how many billion remains to be seen, and the discovery in the subsalt cluster at great depths represents major technological and cost challenges, they said. But in any case, a big new find under evaluation that follows last year's announcement of a giant subsalt field known as Tupi boosts Brazil's prospects as a major world oil province. It also reinforces arguments of those in the government calling for a higher take from oil projects.

The National Petroleum Agency has distanced itself from a statement made on Monday by its chief, Haroldo Lima, who put Carioca field reserves at 33 billion barrels of oil equivalent, citing data obtained informally from Brazil's state-run energy company Petrobras.

The agency said the data was in the public domain after circulating in the media at least since February. Petrobras, which operates the project shared with partners BG Group and Repsol, said more drilling and studies were needed to assess the find, but at no point did any of the companies deny the existence of similar estimates.

More Brazil's oil snafu - much ado about something big | Special Coverage | Reuters

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Gas Prices: The ethanol industry's problem...

Corn Dogs
May 8, 2008 | Gas prices keep rising. So why are ethanol producers hurting?

The continuing crisis over high food prices has inspired a round of global finger-pointing. Politicians blame speculators, and speculators blame the Federal Reserve. Free-traders blame countries with agricultural subsidies, and countries with agricultural subsidies blame free-traders. And everyone blames the ethanol industry: The current mania to turn food crops, especially corn, into gasoline is pushing up the global price for maize, crowding out the production of other crops and generally creating an unfair competition between gas tanks in Missouri and poor consumers in Mumbai. But judging by recent financial results, the big villains in this story—the American companies that are responding to government mandates by buying about 20 percent of the U.S. corn harvest and processing it into fuel—aren't exactly thriving. In fact, their bottom lines and stock prices are suffering pretty badly.

VeraSun is one of the largest U.S. producers of ethanol. Last month it completed its merger with U.S. BioEnergy, giving it an annual capacity of nearly 1 billion gallons. (For 2007, total U.S. production was about 6.5 billion gallons.) In the 2007 fourth quarter, VeraSun ran all out, making 142.1 million gallons, double its output in the 2006 fourth quarter. But prices fell (down 14 percent), and gross profit (broadly speaking, the difference between sales and what it costs to make it) slumped by one-quarter. For all of 2007, VeraSun's gross profit fell to 11.3 percent of revenues from 34.5 percent of revenues in 2006. The stock has lost nearly 60 percent of its value in the past six months.

The chart tells a similar tale at Pacific Ethanol, whose stock has fallen from about $15 to about $3. Pacific Ethanol's gross margin dropped from 11 percent in 2006 to 7.1 percent in 2007 partly because of higher corn costs. Aventine Renewable's one-year chart shows a precipitous fall in stock price from $20 to $4. And a Wall Street analyst recently noted that it faced a potential cash shortfall. When it reported quarterly earnings last week, Aventine said that its average sales price per gallon rose from the first quarter of 2007 enough but not enough to outweigh the rise in corn. And thanks to the high price of energy (it takes energy to produce energy), the cost of converting corn into ethanol rose more than 10 percent per gallon during the same time period. So, between the first quarter of 2007 and the first quarter of 2008, Aventine's operating margins shrunk from about 6.5 percent of sales to 4.7 percent of sales. And MGP Ingredients said profit margins in its distillery products unit fell to 2 percent in the fourth quarter of 2007, down from 22 percent in the final quarter of 2006.

More Gas Prices: The Problem with Ethanol | Newsweek Voices - Daniel Gross | Newsweek.com

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Go easy on biofuels until more clarity: World Bank
Thu May 8, 2008 WASHINGTON - A senior World Bank official said on Thursday that countries should not greatly increase biofuels production until there is more clarity about how much they have contributed to the global food price crisis.

Juergen Voegele, director for agriculture and rural development department at the World Bank, cautioned against shifting a lot of the blame to biofuels but also said massive subsidies for the biofuel industry was not helping the crisis. "We don't think it's advisable to vilify biofuels and make it responsible for all evil at the moment, nor do we think we can continue to support biofuels the way it is supported at the moment in many countries," Voegele told Reuters.

He said the World Bank was analyzing biofuels on several fronts, including its economic, environmental and social value. "The interlinkages with food production are complex, and we need to get a much better understanding of what is sustainable in the long run," said Voegele. "There are a lot of expectations that second and third-generation biofuels will have better economic, environmental and social balance sheets."

Experts blame the food crisis on the conversion of land to grow crops for biofuel, as well as drought, changing diets in fast-growing developing countries and more expensive fuel. Riots in poor Asian, African and Latin American countries have followed the steep rise in food prices, which has also prompted governments to revert to old and potentially damaging controls.

More Go easy on biofuels until more clarity: World Bank | Special Coverage | Reuters