I had an interesting conversation this morning related to inflation and biofuels. I had pointed people to the article that Stuart did about arbitrage between food and fuel (which had more to do with corn ethanol), and one person replied:

I trade biofuels - soy oil is now an acceptable hedge under accounting rules for heating oil.

I asked for a link - they said that they didn't have one, but then added:

No, it is actually the daily mark to market correlations I do. Feb through Sept front soy contract to front HO - 94.3% correlation. FAS 133 requires less correlation than that to be an "effective hedge"

Interesting article in today's NY Times:

Studies Deem Biofuels a Greenhouse Threat

http://www.nytimes.com/2008/02/08/science/earth/08wbiofuels.html

Its also in the Toronto Star today

http://www.thestar.com/sciencetech/article/301676

Concerns about global warming will determine the energy future of the world. If global warming as a result of human created CO2 is a concern than biofuels look good. They do decrease the food supply but we've got to save the earth so we might as well kill a few people by starving them to death instead of having many more killed in a global climate catastrophe. If human created CO2 is not the source of global warming then biofuels are an awful solution to the problem of fossil fuel depletion because they deplete top soil and decrease the food supply. In this case Coal and Gas to Liquids and Microwaving oil shale In-Situ are much better options for our energy future.