Global demand for fossil fuels has created an unhealthy reliance on unstable geopolitical regions and an unhealthy environment. The solution, in the minds of many, is biofuels. Ethanol is clean, green and creates new investment opportunities. What's not to like?

Today, gas stations in the United States sell a blend of fuel that includes 10% ethanol. Ethanol is derived from corn, a renewable resource. Sounds great so far, right? Yes, and no.

The Dark Side of Green
While it's true that ethanol can be created from corn, researchers are still debating whether or not the amount of energy required to produce a gallon of ethanol is greater than the amount of energy it provides. Considering that everything from the tractors that plant the corn seeds, the combines that harvest it, the trucks that haul it to market, the machines that refine it, and the trucks that deliver it to the local gas station are all running on fossil fuels, there's plenty of room for debate.

It's quite possible that the only people benefiting from the process are the farmers, refiners and investors. (To see if you should invest in this new energy source, read The Biofuels Debate Heats Up .)

Engine Impact
There's also a little-publicized issue that's having a major impact on boat engines: ethanol is a powerful solvent. While it goes through the average car engine fairly quickly, it sits it the average boat's fuel take for a much longer period of time. In older boats, the ethanol strips the fiberglass resin off of the inside of the boat's fuel tank. When the engine is turned on, the resin is sucked into the motor, fouling it and putting the boat out of commission.(Read Peak Oil: Problems And Possibilities to learn a little more about the "non" part of this nonrenewable resource.)

In newer boats, the ethanol separates from the gasoline over time, and also attracts water. So a boat parked at the marina for a few weekends may end up with a tank full of water the next time the owner tries to take it out for a ride. Even if the motor does start, once the boat has been run and the motor is hot, it may not restart after it gets turned off. The ethanol evaporates in a hot motor, causing fuel starvation. If you don't think these problems sounds like a big deal, 18 million boaters in the U.S. alone would beg to disagree.

The Next Stage
Now the government is proposing increasing the amount of ethanol used in gasoline to 15%. At this level, even the automobile manufacturers are getting worried. Since most of the cars on the road today were not designed to run on ethanol, car makers have considered invalidating the warranties on any vehicle that uses fuel that contains more than 10% ethanol. While the world needs an alternative to fossil fuels, ethanol may not be the solution we've been seeking.

Related Articles
  1. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  2. Home & Auto

    Don't Be the Victim of Auto Loan Rip-Offs

    Subprime auto loans – and 60-day delinquencies – are up. These 4 signs of predatory auto loans can tip you off before you're caught in one.
  3. Investing News

    U.S. Recession Without a Yield Curve Warning?

    The inverted yield curve has correctly predicted past recessions in the U.S. economy. However, that prediction model may fail in the current scenario.
  4. Stock Analysis

    JCPenney's Path To Profitability (JCP)

    Learn about what J.C. Penney's management team has been doing to profitably grow its business as the company recovers from years of revenue declines.
  5. Home & Auto

    The Latest Airbag Recalls: What to Do

    The latest warnings are from Honda/Acura and Dodge. How to look up your car – and what to do if you find it on the recall list.
  6. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  7. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  8. Investing

    Retirees: 7 Lessons from 2008 for the Next Crisis

    When the last big market crisis hit, many retirees ran to the sidelines. Next time, there are better ways to manage your portfolio.
  9. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  10. Economics

    What is a Complement?

    A good or service that’s used in conjunction with another good or service is a complement.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  3. How does a cost-of-living adjustment (COLA) affect my salary?

    Some companies build salary adjustments into their compensation structures to offset the effects of inflation on their employees. ... Read Full Answer >>
  4. Where can you buy NetSpend reload packs?

    You can only purchase NetSpend reload packs at Giant Eagle, Albertsons, Roundy's and Pathmark supermarkets. NetSpend cards ... Read Full Answer >>
  5. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  6. Do interest rates increase during a recession?

    Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest ... Read Full Answer >>
Trading Center