The End is Neigh for Ethanol

It looks like the end is near…for ethanol at least.

Take Basehor, Kansas-based ethanol plant, Ethenex Energy for example. This company opened its doors in the midst of the ethanol boom two years ago, when “Corn was the cheapest it had ever been and ethanol was skyrocketing,” former Ethanex president and chief executive officer Al Knapp said. “There was a land rush for people to build ethanol plants.”

But today, with the price of corn hitting $6 a bushel and the price of ethanol falling, Ethanex was “definitely held captive by the capital market.”

The company filed for Chapter 11 late last month. And more and more this sort of scenario is playing out for ethanol plants.

“I have gotten about ten emails like [the story above] from farmers in Illinois, MN, Iowa, Wisconsin and Indiana. Either ethanol plants under construction that have ceased or plants that are declaring Chap. 11. Looks like the ‘dream’ of the new gold rush in corn based ethanol is starting to unravel, and fast.

“I am headed out to Minnesota on the 17th and will be visiting a few farms and hog operations as well as a feedlot as well as an ethanol plant (under construction) in Janesville Minnesota. It will be interesting to get a sense of what the sentiment is now as compared to the last two years that I have talked to farmers. Somehow I think a lot of the euphoria is gone, corn at $6 will do that since it has made input costs skyrocket.”

We know that long time DR-sufferers where never fooled by the great ethanol swindle. It was clear that the dream of this corn-based fuel was to be short-lived.

*** As we’ve been saying…there is no advantage so great that the authorities can’t waste it…

Colleague Garry White explains how the oil producers are squandering their windfall revenues:

“The latest data available on World Energy consumption is for 2003 from the World Resources Institute. The figures represent total energy consumption per capita in units of kilograms of oil equivalent (kgoe) per person.

US: 7,794.8
UK: 3,918.1
UAE: 10,538.7
Qatar: 21,395.8
Kuwait: 9,076.0
Bahrain: 10,250.5

“The U.S. is decried as the gas-guzzling capital of consumption…but this is only partly true. It is actually the residents of the Middle East who are the largest consumers of energy in the world. With a wealth and population explosion added to the mix, oil-rich countries are facing an unprecedented energy crunch.

“Middle East governments were more generous in subsidising oil products than governments anywhere else in the world during 2007, according to the IMF. While oil prices rose strongly through the year, governments in the Middle East passed on just 58% of the increase in the cost of importing petrol.

“Egyptians paid just $0.23 for a litre of kerosene at the end of 2006, compared with the $2.25 a litre paid by consumers in Turkey, which passed on more of the increase to consumers.

“The region’s governments also passed on an average of 67% of the increased cost of diesel to their consumers, a smaller amount than governments in any other part of the world. Yemen spent a staggering 9.3% of GDP on energy subsidies in 2006, the most of any country in the region.”

And from Horacio Pozzo, our man here in Buenos Aires, comes word that you can fill your gas tank up in Venezuela for only $3. Still, the economy of Chavez’s country is a disaster. The shelves are empty, and the inflation rate and the murder rate are both at record highs.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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2 Comments on "The End is Neigh for Ethanol"

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GM ‘s sudden stewardship of the environment is simply a way to continue to make gas guzzlers thanks to E85 an extremely inefficient fuel. The CAFE standards call for all car companies to acheive an average MPG for all vehicles. I believe the most recent number is 33 MPG. Well if you make the biggest money off of 10 miles per gallon SUV’s you would hate to say good bye to them wouldn’t you? The CAFE standards has a loophole, that being that an E85 vehicle operating on E85 miles per gallon are ONLY figured against the actual amount of… Read more »
Larry Johnson

Bill Bonner

I have worked in the U.S. ethanol industry for more than 20 years and am one of the founders of the Minnesota Model. I have also been to Australia twice on ethanol issues and continue to work on ethanol projects in the U.S.

Using Ethanex as a representative of the ethanol industry is a poor choice, as their plan was flawed from the beginning.

I would like the chance to meet with you when you are in Minnesota later this month.

Larry Johnson

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