Why alcohol really is the answer to our problems
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No drinker needs to be persuaded of the magical powers of ethanol. It’s what allows us to get through the week. But could it turn out to be the answer to the world’s energy problems too? Brazil has been using ethanol as a petrol-substitute for years because it has a plentiful supply of sugar, the main ingredient in ethanol production. As global oil prices have risen, Brazil has boosted production, sending sugar prices soaring.
Now George Bush is hoping ethanol might solve America’s energy problems too. Last week, he called on the oil industry to invest in biofuel research. Similarly, Europeans are exploring whether adding ethanol to petrol might cut emissions.
How can UK investors get in on the act? One way is via Associated British Foods (ABF:764p), the conglomerate that spans British Sugar to discount retailer Primark. ABF has built Britain’s first production facility at one of its sugar-beet refineries. It is waiting to see whether biofuels become commercially viable before deciding whether to scale up.
Certainly, ABF is well placed. It is the UK’s biggest grain-buyer, the raw ingredient for ethanol in colder northern climates; it already owns and operates refineries; and as the biggest supplier of animal feed in Britain, has a ready-market for the waste. The snag is that biofuels won’t become commercially viable without Government incentives; and countries such as France are stealing a march on the UK. Meanwhile, other issues are weighing on ABF’s share price.
However, now that David Cameron has declared that even the blues are green, Government support for biofuels could move up the agenda. That makes ABF one to watch.
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