Apr 20, 2008

IBD on ethanol subsidies, winners and losers

Oil companies and meat producers cringed when the Energy Policy Act was signed into law in August 2005. The law mandated refiners blend an increasing amount of ethanol into gasoline mixes, with a minimum annual requirement of 7.5 billion gallons of ethanol in gasoline by 2012.

The Renewable Fuels Standard enacted in December upped the ante to 9 billion gallons of ethanol this year, and mandated 15 billion gallons a year by 2022. The two programs also included vast subsidies for refiners and ethanol producers, by some estimates as high as $1.38 per gallon of the corn-based biofuel.

For oil companies, the rules created an immediate dependence on corn producers and ethanol refiners, led by Archers Daniels Midland ADM and privately owned Poet. For beef producers, it promised a future of soaring feed prices. Corn growers and fertilizer producers read the edict as an all-aboard for the gravy train.

~ Investor's Business Daily, "Fuels Rush In; Ethanol Boom Faces Price Bust," February 11, 2008, by Alan R. Elliott

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