The ethanol debacle

NY Times:

Barely a year after Congress enacted an energy law meant to foster a huge national enterprise capable of converting plants and agricultural wastes into automotive fuel, the goals lawmakers set for the ethanol industry are in serious jeopardy.

As recently as last summer, plants that make ethanol from corn were sprouting across the Midwest. But now, with motorists driving less in the economic downturn, the industry is burdened with excess capacity, and plants are shutting down virtually every week.

In the meantime, plans are lagging for a new generation of factories that were supposed to produce ethanol from substances like wood chips and crop waste, overcoming the drawbacks of corn ethanol. That nascent branch of the industry concedes it has virtually no chance of meeting Congressional production mandates that kick in next year.

The decline in fortunes has been extreme for both kinds of ethanol since last summer, when $145-a-barrel oil appeared to shift fuel economics in their favor.

Only months ago, refiners in some regions were buying up as much corn ethanol as they could to blend with expensive gasoline, effectively keeping pump prices down slightly. Meanwhile, investors seemed willing to finance plants to produce next-generation biofuels.

But since the summer, oil and gasoline prices have plunged, while the price of corn, from which virtually all commercial ethanol in this country is made, has remained relatively high. Refiners are limiting their ethanol purchases to a level required to meet federal blending mandates — a level far below the industry’s capacity.

“The ethanol industry is on its back despite the billions of dollars they have gotten in taxpayer assistance, and a guaranteed market,” said Amy Myers Jaffe, an energy analyst at Rice University.

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Wouldn't domestic production of oil and gas make much more sense. It would create jobs and royalty revenue to the government and actually lower the price of energy. Oh, that must be the problem, Democrats want to raise the cost of energy. They want programs that will lower our standard of living and weaken national security. At this point the ethanol boondoggle looks like another energy blind canyon for them.