Energy Demands and Renewables

In light of recent surges in the price of oil – and the price of gas at the pump – we wanted to share a statement from the CEO of Hess Corporation.

John B. Hess, the Chairman and CEO of Hess stated, according to The New York Times, “The $140-per-barrel oil price of three years ago was not an aberration,” he said. “It was a warning.”

Let’s say he is correct, and that oil prices will climb and stay there. What does it mean for renewables? Back in April 2009, The Wall Street Journal reported this:

The exact break-even point for corn ethanol—without any subsidies–is when gasoline costs 90% of what a bushel of corn costs.

So, what is the cost of a bushel of corn today? Currently, about $6.60. The US average for a gallon of gas is $3.52. So, there is clearly a lot of “pain at the pump” to come before corn ethanol reaches it break even point. Until then federal subsidies help make ethanol (and other renewables) competitive.

So, what we’ve taken away from Mr. Hess’ statement and the current price of gas is this: Oil will only get more expensive and the ethanol industry (for one) isn’t quite at it’s break even point. Which, it seems, makes this is a point in time when federal programs could truly ‘bridge the gap’ from one energy source to another.

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