Billions more may be needed for ethanol fiasco

February 8, 2011 08:31

[E]thanol producers are already barely profitable or losing money due to high corn prices, with current subsidies, it seems to suggest either more government subsidies would be needed to keep producers afloat or more bankrupt producers on the horizon (an ethanol bailout?).

Dian L. Chu, Economic Forecasts & Opinions at Business Insider


The CME report went on noting that most of U.S. corn-ethanol producers are barely profitable at present, some are already losing money and that the profit risks remain high for ethanol producers if corn continues to rally.

Currently, the ethanol industry receives 45 cents per gallon in government subsidies — an annual payout of about $6 billion.  And according to, the corn ethanol industry has received over $30 billion in federal subsidies over the last three decades.

So far, there are very few signs of commodity price abating any time soon, while gasoline demand growth is on a downward trend.  So, if ethanol producers are already barely profitable or losing money due to high corn prices, with current subsidies, it seems to suggest either more government subsidies would be needed to keep producers afloat or more bankrupt producers on the horizon (an ethanol bailout?).

Meanwhile the EPA has been sued by industry groups including food/farm as well as automaker over its E15 decision.

Corn Ethanol offers roughly 10-20% reduction in greenhouse gas emissions compared with gasoline.  However, powering a car would require 11 acres of corn a year that can be used to feed at least seven people.    Using ethanol as an additive to fuel won’t replace much foreign oil…reduces fuel efficiency and lower fuel economy.


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