The New York Times takes a cold look at the ethanol industry and essentially writes its obituary. The industry is barely keeping its head above water, even with government support and its long term outlook doesn’t look particularly good.
Here’s a recap of why the industry is doomed:
- Ethanol plants are shutting down almost every week.
- Cellulosic ethanol plants aren’t picking up the slack left from corn manufacturing plants (and seem to have no chance of doing so.)
- Have you seen the price of oil lately? It’s sinking.
- The price of corn isn’t dropping, making corn ethanol a foolish investment.
- VeraSun, Cascade Grain, Northeast Biofuels, and Renew Energy are bankrupt. Pacific Ethanol is suspending operations.
- The “contention” that increased ethanol production raises food prices.
- Private investment in biofuels has plummeted.
- Demand for ethanol is slipping, because demand for gasoline will be down 6% in 2009-2010, compared to 2007.
- Regulations set a 10% mandate for ethanol, but there will be more ethanol available than will fill that mandate. The excess ethanol can’t be put into gasoline, because automakers say that engines aren’t equipped to handle higher concentrations of ethanol.
- The industry is failing even though it gets billions in subsidies from Congress.
The Times article doesn’t even bother citing the recent University of Minnesota study that found corn ethanol isn’t even good for the environment. According to that study, when the environmental effects of growing and harvesting corn are taken into consideration, ethanol is no better for the environment than regular gasoline. If one factors in the damage it causes to air quality, it might be worse.
As bad as it all sounds, the end is not nigh if a person wants to drive and not feel like she is polluting the environment or contributing to foreign oil suppliers. We simply call the solution electric cars. Sure, they’re not ready right now, but neither is ethanol. If the government diverted all its ethanol cash to electric car production, we’d be in better shape.
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