Recently, Volkswagen AG and Daimler AG of Germany purchased minority shares in biofuel manufacturer Choren Industries GmbH. (Another minority Choren shareholder is Royal Dutch Shell.) What’s particularly noteworthy about Choren Industries is the fact that it makes what is called "friendly synthetic biofuel" or second-generation biofuel. These second-gen fuels are made from cellulose-containing surplus materials such as woodchips, straw, or plant stalks, rather than from corn, wheat or sugar cane. The big advantage is that they don’t reduce our supply of human or animal foodstuffs, nor increase demand and prices of these commodities.

Already here in North America--although biofuels have not reached the level of popularity as in Europe--price hikes for everything from bread to eggs to meat and poultry are being blamed at least partially on the tightened supply and subsequent higher costs of the grains used to produce foodstuffs.

There is also concern that if grains such as corn are used extensively to produce biofuel, there will be far less reduction in carbon-dioxide compared to petroleum, because of the energy needed to plant, irrigate, harvest and transport the feedstocks to biofuel plants. On the other hand, if waste products such as cornstalks are used and collected while the corn is harvested, there will be considerable savings. Corn may still be used as food for humans or animal feed, while the leftovers are made into biofuel, significantly improving the carbon-dioxide tally.

There’s another interesting angle to this. If the automotive industry controls the price of fuel, it will be to its advantage to hold down prices, to spur vehicle sales. This is the exact opposite of the oil industry.

What’s your take on all this?