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Investing In Ethanol Stocks

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The Attraction of Ethanol Stocks

ethanol stocksAs the world seeks to cut dependence on oil as a fuel source, ethanol stocks have received a boost of interest. Some countries, especially the United States and Brazil, have begun to alter their fuel supplies and even their vehicles to accept mixtures of ethanol that reduce the total consumption of gasoline, which is made from petroleum. Many farmers have discovered new ways to make profits as the demand for ethanol has increased. This fuel substitute is generally made from corn or sugar cane.

Naturally, as world interest in this form of alcohol has increased, so has interest in ethanol stocks. However, it is easy to get too excited about ethanol stocks. There is a limit of how much ethanol can be used in gasoline in the United States. Since that limit is pegged at about 10 percent, the use of ethanol will not go up in the US unless gasoline consumption also increases. This is relatively unlikely as Americans begin to buy vehicles with higher fuel efficiency. Brazil does have some vehicles that run entirely on ethanol but this does not look like a trend that will affect the use of ethanol very much. Still, investors realize that ethanol is here to stay and so are ethanol stocks.

Developments That Will Affect Ethanol Stocks

Some developments in technology and ethanol production may affect the price of ethanol stocks. Qteros, a company that George Soros backs, is using microbes to create enzymes that change plant waste to ethanol more efficiently than other methods. In addition, some researchers are trying to create a type of ethanol that could easily mix with gasoline at a 30 percent ratio. This would potentially triple the need for ethanol and have the expected effect on the price of ethanol stocks.

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