Alcohol: Not just for drivers any more.

My previous post reminded me of Brazil, and then naturally alternative fuels. Why? Because Brazil is the first country to have adopted alternative fuels on a truly national scale and as a result, declared independence form foreign oil about 3 years ago. "Gasp!" I can here you say. "They must have done it using hinky local branded cars and hand pumps by the side of the road". No, actually, the vehicles were developed by the likes of GM, Ford, Fiat and Volkswagen; and the fuel is sold through gas stations of repute, such as Shell, Texaco and Petrobras.

How could Brazil do this while we, with all the resources at our fingertips, cannot? Well, they used will and power. During the 1970's the (then) military government decided that as a developing nation, Brazil needed oil, which it did not have very much of (although, ironically that is changing very fast). The country could not be held hostage to the whims and fancies of a foreign organization (OPEC) and a market over which they had no control of. Sound familiar? So a program was started to develop alcohol (Proalcool), derived from sugar cane, which Brazil has huge amounts of, as a car fuel. Vehicle manufacturers that had a presence in Brazil were "invited" to participate in the process by developing technology that would allow their vehicles to run exclusively on the alcohol. The next problem to be resolved was the problem of distribution. Distributors balked at having alcohol pumps at every station because they did not think there would be demand for the new fuel. The generals immediately recognized this as a chicken and egg situation: If there was no alcohol to be had, no-one would buy the vehicles. If no vehicles were around that consumed alcohol, there would be no pumps. So, being an authoritarian regime, they came up with a simple solution: If you want to sell gasoline in Brazil, you must sell alcohol as well. Period. The first commercially available vehicle run exclusively on alcohol rolled off a Ford dealer lot in Rio de Janeiro in 1980.

The rest as they say, is history. In the beginning, alcohol run vehicles got tax breaks and the fuel was subsidized. These measures were dropped much later and some years after that the program almost went under, until it was revived again by rising oil costs and the development of vehicles that could run on gasoline AND alcohol, allowing the consumer to pick and choose depending on market costs for each fuel, their own cash availability, etc. there are now vehicles that can run on gasoline, alcohol and propane. In a capitalist system this tends to keep the cost of fuel low, since suppliers know that the consumer can pick and choose the fuel they want to use.

So, how does this compare with the US? Well, there is no will, to begin with. Big oil has little incentive to invest in the distribution of an alternative fuel. The government has protective tariffs on alcohol coming from Brazil and other friendly nations in this hemisphere, which make it impossible for these fuels to compete. We, the scions of Washington have decided, must be supplied by corn farmers in Iowa. The fact that this is less environmentally friendly than sugar cane and there is not enough corn around for it to make a viable case for widespread distribution, dooms the program from day one. Mr. Obama, if I were to make one suggestion, it would be to pass legislation requiring oil companies to use 3% of their profits solely for the development and distribution (in equal parts) of alternative fuels. The market will take care of the rest.

Small is In, Prices Low, Don't Buy Now.

The Wall Street Journal reported today that car makers are increasing discountes on smaller cars. Clearly a sign of the times, since if any car is going to move off the lot, it will likely be a small, gas sipping, low cost model. People simply are not going back to the big SUV's and if the current economic problems persist, they may decide to stick with what they have or, if they are feeelong flush, snap up a decent used car at a great price - there are acres of good used cars at fire sale prices right now.

If you ask me if now is the time to invest in a new car, I would still say no. Here is why:

- If you think that dealers are discounting 2008 models now, wait until February. They'll practically pay you to take the car.
- There are a host of new models, some of them substantial improvements over the current vehicles, coming on line in 2009-2010.
- You absolutely want to avoid debt right now. If you have cash, and have to buy a car NOW, go and look at a used, low mileage model. With a warranty.

Actually, if I needed a new car right now, I would lease one for 2 years (if I could find a lease) or buy a used vehicle that will get me through until 2010. At that point, the market will be flush with new models, hopefully we will not be in a depression (!) and you will be able to choose a model substantially improved over what is available on the market today.