Profit From the Coming Algae Oil Boom

Profit From the Coming Algae Oil Boom

Algae oil has become the most promising alternative source of energy available on earth. Don’t trust me. The world’s top energy giant believes the same.

ExxonMobil has been The Big Oil player that’s causing all the controversy. The company has put the sum of $600m into a collaboration to investigate possibilities of using algae oil. In the near future, ExxonMobil will work with Human Genome research scientist Craig Venter in an attempt to help algae oil become a more efficient fuel source.

“There has been so much hype and hope about the potential for algae that this announcement should act as a reality check for everyone,” Venter said to The Financial Times.

To date, it was a rare occasion that the industry of algae was not discussed in the mainstream media. However, it is still one of the most feasible alternatives to fossil fuels that are conventional.

The reasoning is straightforward. The argument is simple: algae are among the fastest-growing plants around the globe. They also absorb more CO2 than other plants. As they grow, they create lipids or vegetable oil.

The math is biased in favor of algae. One acre of corn will produce around 28 gallons of oil over the course of a year. In tropical areas, the palms can yield approximately 6,700 gallons of oil per year. A single acre of algae can yield between 20,000 and 100,000 Gallons of oil each year.

The enormous potential is a result of the speedy growth cycle. The algae plant can reproduce as many as six times each day. We’ve all heard that it takes corn throughout the summer to mature fully.

Why Ethanol Doesn’t Grow Any Profits

Oil is everywhere. It’ll be smashed on one day and return to 40s next. Although the volatility in the oil market is likely to be changing anytime soon due to the uncertain economy, there’s something distinctively different regarding the way we’re responding to the return of gas prices that are cheap.

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It’s not so; the green movement will not disappear. Consumers will continue to demand eco-friendly products. An urgency to address the climate crisis and OPEC’s grip on our supply of oil is not abating. We continue to explore alternative energy sources. The next wave of alternative energy has to show it’s sustainable when the hype is gone.

Take ethanol. From the outside, 2006 seemed like a good year to be in the business of ethanol. The shares of Pacific Ethanol were on fire, breaking the $20 threshold at the closing of March. In May, the company’s shares had surpassed $40. Bill Gates’ millions helped propel the stock to new heights, and new mandates from the federal government have almost ensured the viability of the business that converts corn into fuel.
As the years passed that this spring proved the perfect time to market your Ethanol holdings. Pacific Ethanol’s lights aren’t shining the way it was. The stock is nearly 98% lower than its peak in 2006, and Gates is slowly de-winding his stake in the company.

Pacific has been plagued by difficulties in the past. Pacific’s latest annual report is full of issues, such as breaches of some obligations to pay and other mishaps related to the company’s line credit.

However, the biggest issue is that you cannot sell ethanol at a price that is less than the cost to produce it. You would think that this would end the business altogether. However, due to the inexplicably strong government support and backward-looking energy laws, the production of ethanol is likely to continue in spite of the lesson we’ve learned.

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So the main question is whether anyone can come up with an alternate energy source that could be profitable?

Do the Math: 20,000 > 28

When you consider those numbers, one alternate energy option makes a lot of sense, algae. A single acre of corn will give you 28 gallons of oil one year. A single acre of algae could produce anywhere from 20,000 to 100,000 Gallons of oil each year. It’s no wonder that the 2007 update of the Energy Independence and Security Act encourages the extraction of algae’s fuels.

Although the algae fuel industry isn’t overly crowded, there are many players working on extraction, harvesting, and extraction systems that may one day become standard designs for the industry. In only three years, we may witness an energy industry that is booming.

Chevron, as well as Shell, have begun to explore the potential of algae. There are a handful of small firms researching the technology.

As we transition to alternative fuels, those who are early buyers of algae oil could stand to make huge gains If this technology is successful…

Potential Algae Penny Plays

Of course, ExxonMobil’s recent partnership doesn’t mean that we’ll be filling our tanks with biodiesel from ponds as of yet. The developers will need to deal with the genetic engineering and extraction problems…

However, ExxonMobil’s entry into the market for algae oil effectively legitimizes the business. However, as you may have already realized, the growing algae oil industry has few publicly traded companies that you could invest in. But there are some intriguing names that you’ve not had the chance to hear about…

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There are three penny stocks that you should keep an eye on. Each of them has at least a market capitalization of $2 million and a share price of fewer than 10 cents. All of them are listed in the Pink Sheets and Over-the-Counter Bulletin Board:

O GreenShift Corporation (OTC: GERS)
O Nanoforce Inc. (PINK: Nanoforce Inc. (PINK:)
o PetroSun Inc. (PINK: PSUD)

Many private ventures and partnerships are worth watching…

We’ve spoken about Sapphire Energy before. It has secured over $100 million of private funding, which includes a portion that came from Cascade Investment, a holding company controlled by Bill Gates.

There are also Algenol Biofuels. The company has joined forces in partnership with Dow Chemical on a project that will make use of algae as a fuel source to extract CO2 into Ethanol.

“The ethanol would be sold as fuel,” according to The New York Times, “But Dow’s long-term ambition is using this as an element in plastics that can replace natural gas. It also produces oxygen that could be utilized to burn the coal used in power stations cleanly, according to Paul Woods, chief executive of Algenol located at Bonita Springs, Fla. The emissions from the power plant would mostly be carbon dioxide. It could be used to create additional algae.”

The target price for the company is $1.50 per gallon, very affordable compared to corn-based ethanols. A breakthrough such as this could bring this U.S. on the road to energy independence at lightning speed. We’ll keep you updated…

 

 

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