You may have noticed some major oil firms are spending big bucks on green commercials. They concede that “easy oil” won’t be around much longer. Others try to portray the company as more conscientious and environmentally friendly than the consumer would expect.

Every one of these spots ends with the same theme: Oil companies are throwing money at wind, solar and even geothermal energy solutions. Of course, it’s not exactly in Big Oil’s interest to move away from its bread and butter. The harsh reality of higher oil prices is driving consumers toward alternative energies.

Even the auto industry is coming around. Bill Reinert, one of the designers of the successful Toyota Prius hybrid, was speaking to a Seattle Times reporter recently while taking a helicopter ride over an Alberta oil sands plant.

“This is what the end of the age of oil means,” he said. “The car-based culture, the business as usual of building cars and trucks, is going to change dramatically.”

Old Habits Die Hard

Cars have changed a lot since the late 1970s. Vehicles are bigger, stronger and much sleeker than your 1980 Dodge Colt. But one thing that hasn’t changed much is fuel-efficiency. In some categories, it’s actually gotten worse.

Believe it or not, a 1981 Honda Civic would give you almost 45 miles per gallon on the highway and 32 mpg in the city. That easily beats the newer, bigger Civics that are on the road today.

Even the hybrids are catching flak for poor fuel economy. The Prius’ official EPA mileage is 60 in the city, 51 on the highway. But some owners have disputed this claim. They have reported mpg performance in the mid-40s. Maybe they should have saved $18,000 and bought that old Civic back…

However, mediocre performance from these “first generation” hybrids won’t kill this vehicle breed. Hybrids will only get better as technology improves.

The New Old-Fashioned Fuel

The good ol’ government is billing ethanol as the one solution to our energy crisis. We could write for hours why ethanol is a poor alternative to gasoline. It takes too much energy to make, hogs all of our corn and farmland and is difficult to transport. The only reward is that we don’t have to go to the Middle East to get it. But there is another alternative that could actually work…diesel.

Consider this: Diesel is superior to conventional gasoline because the fuel releases less carbon dioxide than regular gasoline and diesel engines get 30% more miles per gallon.

Sure, the older, louder diesel engines coughed massive amounts of nitrous oxide into the atmosphere. But the technology is better now. Diesel engines are cleaner, quieter and more efficient. Just ask someone who lives in Europe…

About half of the cars on the road in Europe are powered by diesel engines. The diesel revolution in Europe began almost a decade ago, thanks to high fuel taxes put in place to help fight global warming.

While the U.S. hasn’t had the love affair with diesel Europe can claim, diesel and diesel hybrid vehicles are poised to gain traction here in the States as petroleum prices continue to rise.

Diesel has a strategic advantage that petroleum just can’t match: It can be made without drilling a single hole into the ground in search of crude. In fact, biodiesel can be made out of animal fats, soybean oil and even waste food oils.

There are a lot of great ideas that will come out of this. Keep your eyes peeled…

Best,

Greg Guenthner
February 28, 2008

P.S.: In fact, one already has come up… Traditional biofuels are made through complex chemical reactions between these naturally found oils, resulting in numerous byproducts. But one cutting-edge company has a better way to pump out the biofuel.

The Diesel Answer to the Oil Problem was originally featured in the Penny Sleuth.

According to the Wall Street Journal, that adds up to one car for about every six and a half people in the world, and more than 25% more cars and light trucks that are on the road right now.

While this might leave you stranded in a few extra traffic jams over the next 14 years, some more important questions come to mind. Mainly, how will these cars be powered?

For the past month, I’ve been writing to you about the rise of ethanol. Today, we’ll take a look at another alternative fuel and what its impact might be on personal transportation: biodiesel. And you’ll also get a chance to check out some tiny companies in the biodiesel industry that will have tremendous growth opportunities over the next several years.

The New Diesel

At Agora Financial’s monthly editors meeting Thursday, I spoke with Outstanding Investments editor Justice Litle about whether diesel hybrids will emerge as a more viable source of private and commercial transportation in the United States.

His answer was a resounding yes. Diesel hybrid vehicles and biodiesel fuels will gain their own market shares, and it will be technological improvements that make this possible.

And like ethanol, you don’t need crude to make biodiesel. Animal fats or soybean oil and even waste food oils (think of the vats of this stuff cooking those fast-food French fries) are used to make the fuel. Biodiesel advocates will tell you that advancements in the process will allow biodiesel facilities to use almost any fat or oil to make the fuel within five years (now, most use soybeans).

Justice offered me an example of popular vehicle on the roads today: the gasoline-electric hybrid. In their early stages of commercialism, these hybrids were terrible, inefficient machines, Justice said. But the technology for hybrids has been improved, and the vehicles now not only run better, but they are getting better gas mileage as well.

These same trends will shape the future success of diesel fuel as we embark on the age of expensive energy.

Justice even took the time to discuss diesel in the January issue of Outstanding Investments, writing that diesel is superior to conventional gasoline because the fuel releases less carbon dioxide than regular gasoline and diesel engines get 30% more miles per gallon.

So why haven’t we all been driving cars with diesel engines for the past 50 years? Well, for quite a while, the bad overshadowed the good. Old diesel engines are notorious polluters (nitrous oxide is one of the culprits), not to mention loud. But now with gasoline prices reaching new highs on what seems like every day of each week, the U.S. is looking at diesel in a whole new light.

Diesel Nation?

As it turns out, America’s love affair with gasoline has left us a bit behind the rest of the world when it comes to diesel vehicles.

For instance, Justice notes that about half of the cars on the road in Europe are powered by diesel engines. The diesel revolution in Europe began almost a decade ago, because its citizens have been dealing with high fuel taxes and global warming concerns.

And some states have taken to biodiesel, adding to its legitimacy here in the U.S. Minnesota has had a biodiesel law on the books since last year that requires all diesel fuel sold in the state to contain at least 2% biodiesel. A similar regulation in Washington State will take effect in late 2008.

And just check out the positive environmental effects biodiesel can have (submitted by an alert Sleuth reader): When using pure 100% biodiesel, there is a 70% reduction in carbon dioxide, 100% reduction in sulfur, 65% reduction in particulate matter, and 55% reduction in volatile organic compounds and carbon.

However, converting an entire modern country from gasoline vehicles to diesel or diesel-hybrid technology won’t happen overnight, which is probably why ethanol stocks are getting their moment in the sun right now and biodiesel companies are looking like much more speculative plays.

So you are presented with a unique opportunity now to watch some of these tiny biodiesel companies grow into the next hot stocks on Wall Street. Consider this the ground floor of biodiesel investing, and be sure to keep your eyes open for these small companies going public over the next few years.

Here are a few biodiesel stocks I’ve come across recently. Remember, these are tiny companies right now, so it would be in your best interest to thoroughly research the businesses and the biodiesel market before you invest.

Biofuels Corp. (BIFUF: Other OTC); Recent price: $3.00; 52-week range: $1.50- $4.45. Biofuels Corp. — which also trades on the London Stock Exchange under the ticker BFC — is in the process of building its biodiesel processing plant on the north east coast of England.

Nova Oil Inc. (NVAO: OTC BB); Recent price: $7.25; 52-week high: $9.15. Nova currently has two full-scale biodiesel production facilities under construction, with a reported combined production capacity of more than 30 million gallons per year.

Earth Biofuels Inc. (EBOF: OTC BB); Recent price: $2.55; 52-week high: $2.90. Earth Biofuels’ first production facility in Mississippi can produce 2 million gallons of biodiesel a year. Its second facility in Oklahoma (currently under construction) will be able to produce 10 million gallons of biodiesel a year.

In 2005, President Bush visited a biodiesel facility in Virginia, making him the first president ever to make a visit of this kind. He has also endorsed the development of biodiesel in numerous speeches, calling it “one of our nation’s most promising alternative fuel sources.”

If that’s any indication of success, biodiesel has a long, bright future ahead of it.

Best,

Gunner

Before the Biodiesel Boom was originally featured in the Penny Sleuth.