E85 Boondoggle of the Day: Ethanol Suppliers Go Belly-Up

Edward Niedermeyer
by Edward Niedermeyer
e85 boondoggle of the day ethanol suppliers go belly up

While we wait for automaker bankruptcy filings, we have a little schadenfreude from a different (but equally deserving) sector to keep you going. Reuters reports that spiraling foodstock costs are tearing a giant hole in profit margins for domestic ethanol suppliers, causing a spate of bankruptcy filings. Corn (the main ingredient for domestically-produced ethanol) was already hitting record prices before the recent deluge in the Midwest. Post-flooding price spikes have wrought havoc on the whole ethanol business plan. Alex Moglia of Moglia Advisors, a biofuel consultancy group, tells Reuters that 12 biodiesel and ethanol plants have declared bankruptcy in recent months, with more to follow. The plants that are still open are typically producing at about half capacity, says Moglia. Ironically, a major problem for domestic ethanol producers is the transportation of their fuel. The majority of ethanol refineries are in the Midwest, which has a massive oversupply of corn juice. High fuel costs are preventing America's alternative fuel from reaching larger markets on either coast at competitive prices. Ultimately, the big boys of ethanol– your ADMs, and VersaSuns– will survive the hard times for ethanol producers, thanks to agribusiness diversification. It's the little guys that are being forced out of business, as reality begins to hit home for America's "magic fuel." Even so, their elected officials are probably lobbying for bailouts as we speak.

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  • on Jul 01, 2008

    No problem. More government money will fix this. That is how it is done in the USSA. Or is it time to quit digging? Ethanol is a stupid idea even by government standards.

  • Stein X Leikanger Stein X Leikanger on Jul 01, 2008

    This link will take you to an illustration demonstrating the perfect stupidity of growing fuel: http://www.russianplanet.ru/filolog/dore/munchausen/munch07-290.jpg For those not acquainted with the Baron von Munchausen fables, that's the baron lifting himself and his horse out of a swamp they've gotten stuck in, by the hair in the nape of his neck.

  • Axel Axel on Jul 01, 2008

    I feel no schadenfreude when it comes to the D3 going bankrupt. Millions will be economically displaced, and it will be a wide-spread, far-reaching disaster for the USA. Fury? Rage? Righteous indignation that the crooks running these companies ran them into the ground while making millions of dollars and setting themselves up for life? Absolutely. But not schadenfreude.

  • Kevin Kevin on Jul 01, 2008

    Does this imply that centralized government dictate is NOT the best way to run an economy? Say it isn't so!