Biofuels: Targets Have Been Set As Governments Have Put Wheels In Motion
Rob Mackrill - Mon 11 Jun, 2007
In spite of darkening clouds swirling around the oil price, Brent Crude felt the general market malaise last week and dropped more than $2 to close at $68.60 on Friday. But how much of a threat biofuels are appears to be pretty hazy at this point. Governments have put wheels in motion. Targets have been set and taxpayers money dished out. Europe is targeting 5.75% to come from biofuels by 2010 and 10% by 2020. The US has a proposal to increase production sevenfold by 2022. Meantime, the concerns, as outlined in a UN report, of the impact this rush for green fuel might have are significant...
*** In spite of darkening clouds swirling around the oil price, Brent Crude felt the general market malaise last week and dropped more than $2 to close at $68.60 on Friday.
Amidst the usual suspects threatening oil - geopolitics, supply disruptions etc - OPEC have said they are not prepared to raise output. They have muttered darkly too that the West’s current preoccupation with biofuels might curtail future production plans. The notion of the West one day not being dependent on their crude is not a happy one for these petrodollar rich nations.
But how much of a threat biofuels are appears to be pretty hazy at this point. Government’s have put wheels in motion. Targets have been set and taxpayers money dished out. Europe is targeting 5.75% to come from biofuels by 2010 and 10% by 2020. The US has a proposal to increase production sevenfold by 2022. Meantime, the concerns, as outlined in a UN report, of the impact this rush for ‘green fuel’ might have are significant. Among them the demands it would make on land and water, the potential negative impact on soil quality of “monocropping” and the threat to the poor of food shortages from the reassignment of land. And last but not least, the insanity of chopping down rainforests in Indonesia and Malaysia to make way for palm oil plantations, another source of biofuel.
Global panacea it isn’t says colleague Garry White, UK editor of Outstanding Investments, in his free eletter [details below]. The idea it is a solution at all is thrown into further doubt by a report at the week-end.
Top government environmental scientist, Roland Clift, thinks promoting ‘bioethanol and biodeisel produced from plants is a “scam”’ and more likely to increase rather than reduce greenhouse gas emissions.
“We calculate that the land will need to grow biodeisel crops for 70-300 years to compensate for the CO2 emitted in rainforest destruction.” He tells the Sunday Times.
He offers little encouragement to the mass planting of biodeisel ingredient oilseed rape either. The crop generates ‘copious amounts of nitrous oxide – an even more powerful global warming gas than CO2.’
It looks like we should be more worried than OPEC...
If you’re interested in learning more on biofuels, as well as natural resources and biotechnology why not register for Garry White’s free email ‘Garry Writes’?
Just click on the link and register:
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*** The late activist investor, James Goldsmith, might have relished the twin stories on the front page of today’s FT...
Active investment seems to have gone mainstream to judge from the headlines. Increasingly shareholder David’s in the form of activist hedge funds are putting the boot into corporate goliaths in the UK market.
And the trick is you don’t need a big money stake to get a big money reaction.
Activist investor, Efficient Capital Structures, with a mere 210,000 shares (I make that about £332,000 worth) is making the news as it agitates for a restructuring at Vodafone, capitalised at over £83bn and boasting almost 53bn shares in issue according to Bloomberg. City money managers give conflicting views in their response to the development. One, M&G, dismisses it loftily as a cheap publicity stunt. Others are more supportive. They like the fact these hired guns do their dirty work for them.
Plus they get to see more of the upside than if they were taken out by private equity.
Either way this is a new development it seems and other activism at large includes hedge fund Atticus Capital.
With a 1% stake in Barclays, they are demanding it drop its bid for ABN Amro. And Cadbury Schweppes, under pressure from a hedge fund fronted by US activist Nelson Peltz, ‘decided’ to demerge its US drinks business. A decision that drew the wrath of legendary UK investor Anthony Bolton again in today’s FT: “A world where a 3% activist shareholder could have this degree of influence on the board of a listed UK business is a different one
from where I have spent the last 35 years.”
And 3% sounds an awful lot in the world of Efficient Capital Structures. It would account for almost £2.5bn worth of Vodafone stock, instead of the puny £332,000 stake they reportedly hold. But when you’re mining for loopholes in the small print of company law, it’s surprising what you can do.
“It’s a bit of a wake up call” says Axa investment director Jim Stride of the ECS action. “Size is no longer a defence.”
Watch out big oil...
Regards
Rob Mackrill
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