It’s almost axiomatic to say that we all care about the effects of global warming (hi Mr. Gore!). Nobody wants to swim down 5th avenue. But it really wasn’t until last year’s phenomenal oil spike that people started talking about alternative energy with any kind of practical fervor – and that brought investment dollars.

Oh, how times have changed

NYMEX Crude oil closed at $37.51 on Friday. Inventories at the Cushing, OK deliver point were pushed almost to the limits. Gasoline nation-wide averaged $1.94 (though I paid $2.09 a gallon locally) and while not great, it’s better than the nation-wide average of $2.96 this time last year, and a lot better than the crazy $4 gas we bought at the peak in June.

The bonus of those high gas prices last spring and summer was that the pain was so great that drivers actually drove a little less. Consumption actually declined, and some of that behavior shift has extended into last fall and this winter. The global economy hasn’t helped fuel any fuel consumption either.

But that could be changing. The latest Energy Department’s Weekly Petroleum report showed gasoline demand for the four weeks ending Feb. 6 was up 0.1% from the previous year. OK, it’s not much, but it’s a little. But for alternative energy, it’s probably too little, because gasoline demand impacts directly on ethanol demand.

Agriculture Secretary Tom Vilsack said last Tuesday that the EPA “should raise the amount of ethanol it requires to be blended with gasoline in order to help the U.S. ethanol industry.” Currently, the government only allows a 10% ethanol-gasoline blend. More ethanol has become an economic argument, not an environmental one, because the ethanol industry is in need of help of some serious help.

Ethanol giant VeraSun Energy Corp filed for bankruptcy back in October, and it has been shopping around for buyers for essentially all of its plants. Other companies are feeling the pain as well. Corn prices are still relatively high, and gasoline demand has stayed low (along with prices) – which means for ethanol, margins are squeezing ethanol companies right out of business. No margin. No ethanol supply.

Currently, the federal government’s renewable fuels standard requires 11.1 billion gallons of renewable fuels to be used in 2009, with 10.5 billion gallons of that coming from corn ethanol. That target climbs to 36 billion gallons of renewable fuels by 2022 (15 billion gallons of corn-based ethanol & 21 billion gallons from advanced biofuels). The chances that those targets will be met are in serious doubt. ADM recently estimated that 21% of U.S. ethanol capacity has shut down due to low margins and weak demand.

But there is more to alternative energy than ethanol, it just happens to be the one you can most directly trade as a commodity investor.

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