Author by : Eric Tan

The price of Gasoline is costing more than it was last year and every motorist is feeling the pinch from rising gasoline prices. But the worst is still yet to be. It may cost more in the near future.

Recently, oil has reached a high of $79 and some experts are predicting that it will go to $100 by end of this year - 2006. There are 2 different opinions on this topic. Some experts disagree while others are quite certain that this is the direction. Consider this - that in 2004, when oil was at $55, many financial institutions predicted that it would fall back. Bear Sterns forecasted a $25 level in 2005. Goldman Sachs estimated a higher $30 level. But since then, oil has been on a relentless journey in upward trend, wiping off every “preconceived” price barrier, sending fear and panic to investors and causing stock price to fall on many occasions. I know because I trade in options in the US market everyday and I had my far share of losses because of oil related issues. And yet at the sametime, I have also made some nice profit from oil and energy related companies including Pacific Ethanol - symbol “PEIX”

But will oil price ever go above $100. It is a possibility that is posing a big concern to every country and in brief, these are some of the valid concerns -

Saudi Arabia, the world’s largest producer, may be running out of oil in the near future because the present oil wells were found generations ago. Oil demand is increasing on a global scale but no new oil wells have been found. It is just a matter of when will it be possibly depleted

Middle East oil politics is holding the world in “hostage” with regards to oil price.

Iran has the second largest reserves of crude and is not on friendly terms with the US and its allies. Iran’s insistence on its nuclear program is making many countries uncomfortable and nervous. And yet, nobody really wants to offend the country for fear of oil prices rocketing out of control

The Nigerian and Iraqi situations continue to get worse.

China and India’s economy are growing faster than a decade ago and their “appetite” for energy, the continual increasing demand for oil has caused them to go on a worldwide buying spree for oil companies, especially for China.

These facts that do no present a good scenario for oil price to fall. Let’s look back -

In 1973 the Arab embargo sent the oil prices sky high and a global recession followed.

In 1979 the Iranian revolution event sent oil prices soaring and caused another global recession.

With the current Middle East problems, the fear of another oil price spiking up is not unexpected. And if it does, (just a matter of when) recession is certain. For now, one cold hard truth is certain - oil price is unlikely to fall back to pre $20 or $30 level.

So … why ethanol? The reasons are obvious by now. Alternative energy like ethanol and Bio-fuel are gaining public acceptance quickly and it is cheaper than gasoline. And no single country in the world wants to be 100% totally dependent on foreign oil - for many obvious reasons. So, the focus has been on alternative fuel and ethanol and Biofuel are leading the way.

And ethanol does has some benefits. Besides being cheaper, it is made from plants and it is renewable fuel. It is biodegradable and environmental friendly and it provides high octane at low cost. And if you are adventurous, you can make your own ethanol in a small scale.

[tags]ethanol, ethanol fuel, ethanol production, E85, E10[/tags]

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