An Equation for Growth

High energy prices plus an improved investment outlook could equal a time for true growth
| March 18, 2011

The U.S. imports more oil today than it did before Sept. 11, 2001, a fact Sen. Richard Lugar, R-Ind., made note of in a February speech prepared for an appropriate topic: energy and our nation’s continued dependence of foreign-based fossil fuel. Almost a month later, the Indiana senator provided an opinion piece for a state newspaper on energy and where the majority of our oil originates. And why not? The price for a barrel of oil has again broken the century mark, and the main driver is again directly linked to political unrest in the Middle East (at press time Muammar al-Gaddafi was still in control of the Libyan government). Given the reality that how we live is possibly most affected by the entities that provide our fuel, what does $100-plus oil mean for the biorefining industry?

The easy answer is that high energy prices, while unfavorable for economic stability, provide an unrivaled example of just how important the biorefining industry and the homegrown, advanced biofuels that come along with it, truly are to the country. “Saving energy means saving money,” Lugar says, noting that the present “is an age in which every barrel produced, every barrel replaced with an alternative … has outsized importance.” Lugar of course isn’t the only policymaker or individual to use high energy prices as an indication of the U.S.’ reliance on foreign-based fossil fuels, but there are other indicators besides surging prices that show the industry is approaching another level of growth.

The U.S. Energy Information Administration has already released its 2011 yearly overview, and according to its predictions, the high price of oil that may occur later this summer will someday be the norm. The average price for gasoline in 2035 will start at $3.69 per gallon, according to the EIA. Several projections show a gallon of gasoline will surpass $5 this summer, and while the EIA can’t predict political turmoil, it did note in its report that “rising fuel prices also spur domestic energy production across all fuels.”

But, if that is the case, will the industry be able to truly take advantage of high energy prices this summer? According to a survey conducted by the National Venture Capital Association, more than half of VCs expect investment to pick up in 2011, much of which may come in the clean technology sector. VCs (53 percent) also do not intend to invest outside the U.S. “An anticipated rise in venture investment and improvement in the national economy are closely linked,” says Jessica Canning, global research director for DowJones VentureSource, regarding the NVCA survey. The uptick in the VC community and predictions for 2011 is good for those looking to finance a project, but combined with the unfortunate but obvious benefits that high energy prices bring for an industry looking to make a permanent foothold, there are indications now more than ever that projections like Canning’s could come to pass.  “Raising capital also gives companies an opportunity to grow, adding to their headcount and spending power as they try to become the next Google or Apple.” Especially considering that, like Google, nearly everyone has a use for fuel. 

—Luke Geiver