Tax incentives go up in smoke, businesses still fail to make money

As reported by Timothy Gardner of Reuters, ethanol prices are so low that producers are not making any profit.

U.S. weekly ethanol margins still in the dumps

by Timothy Gardner

NEW YORK, Nov 2 (Reuters) – U.S. ethanol margins ticked a few cents higher this week as producers fetched slightly higher prices for the renewable fuel, but the average producer was still making next to no profit, analysts said Friday.

So, production of ethanol is

  • ruining the food economy
  • polluting the rivers (and streams and Gulf of Mexico and everything else) with agricultural runoff
  • eliminating grasslands
  • using up water in water-poor regions

and the bad news is … nobody is even getting rich off this behavior! Oh, and it is having zero impact on our need for foreign oil. The robber barons of old must be turning over in their graves.

More from Mr. Gardner:

“When gasoline prices are much higher than ethanol prices, some blenders add more ethanol to gasoline than required by law, which eventually boosts prices for the renewable fuel.

But the slighter better ethanol margins were not enough to line the pockets of renewable fuel producers

“When you consider overhead costs, you’re probably below break even,” Ron Oster, an ethanol analyst at Broadpoint Capital, Inc, in Missouri, said in an interview.”

Why such trouble? Because the corn-ethanol business faces problems like

“rising prices for natural gas, used to power most bio-refineries, [that] cut profit margins down to about break even”

Read the whole article for bleak projections of profit, more explanation of high production costs and revelations about the poor efficiency of many ethanol plants.

Why are we subsidizing this industry, and why are we pretending that it is good for the environment?

© James K. Bashkin, 2007

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