It seems that when gas gets above $3.00 per gallon people talk and complain about it, but somewhere around $3.25 per gallon is when people start to make major changes to their habits. Sales of SUVs decline while sales of hybrids go through the roof. People put a premium on living near their job, or working near their home. Vacation plans get adjusted, and the boats get docked...
This may be a little off-topic for a real estate web site, but let's face it – the price of gas has a direct impact on the sustainability of Phoenix's "urban sprawl" growth patterns. Living in Surprise, or Buckeye, or Queen Creek is not going to be as desirable if you're paying $4.00 per gallon of gas!
This week at the Brazilian Ethanol Conference in South America, Brazil announced major breakthroughs in the technology of producing ethanol.
The current production process has a distinct drawback which leads to two specific problems. Currently, only the "food" portion of the plant is used – the corn or the sugar itself. This leaves us with the issue of having to transport and dispose of a massive amount of unused plant. It also drives up the market price of that specific food, which impacts many other parts of our society.
This week Brazilian officials announced that they had developed a way to use the entire crop, rather than just the edible portion. And they dropped a bombshell by saying they expect the cost of production to be around 35 to 50 CENTS PER GALLON, down from the current cost of about $2.25 per gallon.
There were some other interesting notes if you'd like to read further, so I'll post a couple of links below. But the bottom line is that the long-term outlook for the cost of energy is good. First of all, it reduces our dependence on, and the importance of, the Middle East. Secondly, the U.S. is already the 2nd major producer of ethanol. Thirdly, if the edible portion of the plant isn't required, fuel might one day be made from all types of plants and grasses – many countries could one day provide their own renewable energy. And fourthly, Surprise, Buckeye, and Queen Creek can continue to expand!
John Mauldin's Thoughts From the Frontline. If you want to read great economic analysis in an easy-to-understand writing style, click here to sign up for your free newsletter. www.frontlinethoughts.com
George Friedman, Stratfor. A Guest writer for John Mauldin's Outside the Box newsletter. George Friedman provided the analysis on this information.
More about the Brazilian Ethanol Conference – click here.
- Chris Butterworth