Ethanol Companies are Staging a Comeback as Oil Surges
The LA Times reports on the fuel that is good for the corn industry, but not so much for everyone else.
- Corn-based ethanol is the renewable fuel environmentalists love to hate. But as turmoil in the Middle East and North Africa has sent oil prices soaring, U.S.-made ethanol is making a comeback. Plants mothballed during the economic downturn are reopening. Domestic ethanol production hit record levels last year, topping 13.2 billion gallons, according to the Renewable Fuels Assn. in Washington.
- The recovery can be seen in Stockton, where a once-shuttered factory is now thundering to life. Train cars laden with Midwestern corn arrive daily to feed the grinding mills and steaming pipes that distill the grain into gasoline substitute. The surrounding air is pungent with the smell of yeast.
- That’s largely because of Uncle Sam. Concerned about U.S. reliance on foreign oil, federal lawmakers mandated the nation to quadruple its use of biofuels to 36 billion gallons annually by 2022 from 2008 levels. Corn-based ethanol is assured a 15-billion-gallon share of that market. Plus it’s heavily subsidized. The federal government gives producers a 45-cent-a-gallon tax credit. A number of states provide subsidies as well.
- The liquid is blended into almost every gallon of unleaded gasoline sold in the U.S and accounts for about 10% of the fuel that motorists pump into their cars. That percentage is set to rise as the U.S. Environmental Protection Agency recently approved the use of blends of up to 15% ethanol for newer vehicles.
- But whether corn ethanol is good for the planet, U.S. taxpayers, the global food supply — or even an automobile’s engine — is a matter of intense debate.
- Some scientists have concluded that growing corn, harvesting and distilling it, and trucking it to refineries causes as much environmental damage as burning oil (NYSE:USO). Many environmentalists want taxpayer subsidies devoted to developing next-generation biofuels rather than supporting big agribusiness and the oil (NYSE:USO) companies that are now operating ethanol plants.
- An estimated 35% of the U.S. corn crop will be devoted to ethanol this year, a figure that makes some agricultural and global food policy analysts uneasy.
- ….”We have to become energy independent. We don’t want to do it at the expense of food riots,” Clinton said.
- Auto manufacturers (NYSE:F) (NYSE:GM) (NYSE:TM) are concerned as well. They’re suing the EPA to stop sales of the 15% ethanol blend, known as E-15, which they said would confuse consumers and damage older vehicles.Ethanol industry officials said E-15 pumps would be clearly marked, so consumers would not be misled.
- Critics of ethanol aren’t deterring investors — 17 idled ethanol plants have reopened across the United States in the last year. And the country’s largest producer, POET Ethanol Products, is seeking federal help to construct a 1,800-mile, $4-billion ethanol pipeline.
This is a guest post written by Trader Mark who runs the blog Fund My Mutual Fund.