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Quick Hits: US Ethanol Faces Rough Road to China

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Brief scrutiny of today's headlines.

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General Motors (GM) is in China this week thumping the tub for ethanol.

The automaker will hold conferences for the Chinese media with Coskata, a start-up. GM has invested in the Warrenville, Illinois-based company as part of its effort to reduce future dependence on oil.

Coskata says it relies on a proprietary process that uses patented micro-organisms to produce ethanol from just about any carbon-based feedstock, including garbage, old tires and plant waste. Coskata says it can produce ethanol for less than $1 a gallon. Citing the Argonne National Laboratory, which reviewed the process, Coskata says that for every unit of energy used, its ethanol process generates up to 7.7 times that amount of energy.

Coskata plans to have a pilot plant in operation by 2008's fourth quarter. GM plans to use the fuel in test vehicles at its Milford Proving Grounds.

Grain-based ethanol is likely to be a tough sell in China, where inflation has driven up the cost of food. Critics say the ethanol boom in the US has already driven up food prices, especially on corn, by diverting grain to ethanol plants.

In the US, Congress has mandated the use of ethanol in gasoline as a way to reduce dependence on foreign oil, especially supplies from the Middle East. But it takes more energy to produce a gallon of grain-based ethanol than the fuel delivers to users.

Ethanol stocks have been hit hard, including Pacific Ethanol (PEIX) and VeraSun (VSE).

Electric cars are the long-term fix to dependence on foreign oil, but so far limited battery life limits their usefulness. Nevertheless, an electric car has yet to make the list of all-time worst cars in creation.


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