Thursday, February 12, 2009

Rough Sledding for Ethanol

Now that Congress is about to pass, and the President is eager to sign, the biggest economic boondoggle of my lifetime, thanks to the New York Times, we can once again turn our attention to one of the longest running economic boondoggles: ethanol.

The Times reports on the state of the ethanol industry and, not surprisingly, it isn't pretty. According to the write-up, "Bob Dinneen, president of the Renewable Fuels Association, a trade group, estimated that of the country’s 150 ethanol companies and 180 plants, 10 or more companies have shut down 24 plants over the last three months. That has idled about 2 billion gallons out of 12.5 billion gallons of annual production capacity. Mr. Dinneen estimated that a dozen more companies were in distress."

The culprit is a sever constriction in gasoline demand throughout the country. One of the more conspicuous effects of this constriction is that development of celluslosic ethanol, which was supposed to alleviate the econmic impacts on price and availability of food and feedstock caused by corn ethanol, is essentially dead in its tracks.

Here's a telling quote from an economist interviewed by the Times:

"Cellulosic ethanol is something that is always five years away and five years later you get to the point where it’s still five years away,” said Aaron Brady, an energy expert at Cambridge Energy Research Associates, a consulting firm.

But, perhaps my favorite observation (to bring this full-circle back to the impending Stimululs Package) is this:

"This is not how it was supposed to be when Congress mandated in 2007 that refiners blend increasing amounts of ethanol into the country’s transportation fuel supply."

Unintended consequences of pork-barrel legislation? Really? You don't say.