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Tuesday, November 18, 2008

Cheaper oil, financial meltdown toast ethanol industry

From an article by Mike Ivey posted on The Capital Times:

Well, one thing about the global recession - it sure brought oil prices down.

Just a few months ago it seemed certain that gasoline was headed toward $5 a gallon. Now, it's back below $2.50. If it falls much lower, maybe GM will consider reopening its monster truck factory in Janesville.

In all seriousness, however, you hope that cheaper gasoline doesn't distract Americans from the challenge at hand of reducing dependence on foreign oil while curbing air pollution.

But if history shows us anything, consumers have short memories when it comes to anything related to their automobiles.

What the financial meltdown has done though is deal yet another blow to the beleaguered ethanol industry which was just starting to get a real toehold in Wisconsin before the bottom fell out.

Man, this state has got bad timing.

First it completely missed the IT revolution of the 1980s.

Then it largely missed out on the ethanol boom of the 1990s as neighboring states like Iowa and Minnesota jumped in big time.

Now, with Wall Street in turmoil, dollars for new biofuel ventures are even harder to come by.

In June, North Prairie Productions abandoned plans to build a $42 million biodiesel plant near Evansville in Rock County. It would have been the largest in the state, producing an estimated 45 million gallons of fuel annually.

And the story is being repeated across the Heartland.

In Missouri alone, more than a dozen ethanol and biodiesel companies sought state regulatory approval in 2006 to recruit investors for projects in South Dakota, Nebraska, Minnesota, Illinois, Indiana and Iowa. Two years later, as many companies have failed or stalled as have finished their projects, according to a recent Associated Press report.

But I'm not crying over the biofuel bust.

From the beginning, it was little more than a government subsidized boondoggle that only put money in the pockets of huge corn growers like Archer Daniels while diverting attention from producing more efficient vehicles or encouraging transportation alternatives.

Moreover, from an air pollution standpoint, corn-based ethanol now appears to be a serious net loser when it comes to carbon dioxide (CO2) emissions, a major contributor to global warming.

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