E85 Boondoggle Of The Day: Reborn In Obama?

In the last E85BOTD, Farago had the temerity to suggest that perhaps E85 and E10 are DOA. And we have surely come a long way from even nine months ago, when corn-based ethanol was still publicly accepted as an environmentally-friendly fuel for American energy independence. You know, a tortilla riot and media feeding frenzy ago. But mandates are still in place, and as the Chicago Tribune reports, the ethanol industry is awaiting the Obama inauguration with quivering anticipation. After all, Obama has long touted ethanol as a cornerstone of his energy independence plan, even pledging that all new cars would be flex-fuel by 2013. And a quick look at opensecrets.org (tsk, no ethanol breakouts) shows that a number of big names in biofuels gave heavily to Obama and the Democrats. Also, the recent announcement that Dr. Stephen Chu, Lisa Jackson, and Carol Browner will fill key energy and environmental roles in the Obama administration has the biofuel bizz cheering. Of course the all-flex-fuel-by-2013 pledge was qualified with a hearty “if elected,” and these things have a habit of changing. Just ask the UAW.

According to Sanjay Shrestha, an alternative-energy analyst for Lazard Capital, Obama’s victory was an “incremental positive” for ethanol, but he says “we shouldn’t draw the conclusion that it’s going to revitalize the corn-based ethanol industry.” After all, “If you just give them more money, it’s just going to make the price of corn higher, which is going to make the situation worse for them,” says Tom Elam, of FarmEcon. “As a result of their unbridled enthusiasm, they have built an industry bigger than the government mandate and the ability of corn growers to provide.”

And though his midwest roots meant his campaign rhetorically supported ethanol, the high prices, reduced mileage, environmental damage, corn market disruption and endless other downsides could see Obama reneging on old loyalties. More likely than seeing a flex-fuel-based policy, Obama will direct money towards research on cellulosic biofuels. Meanwhile, in the dark and cold of the open market, corn ethanol refineries are shutting down, plans for new ones are being canceled and firms are going bankrupt.