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Is ethanol traffic still strong?
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<P mce_keep="true">[quote user="petitnj"]This is from August 2007. But with the rapid fall in corn and oil prices, it is not too far from today's numbers The cost of producing ethanol varies with the cost of the feedstock used and the scale of production. Approximately 85 percent of ethanol production capacity in the United States relies on corn feedstock. The cost of producing ethanol from corn is estimated to be about $1.10 per gallon. Although there is currently no commercial production of ethanol from cellulosic feedstocks such as agricultural wastes, grasses and wood, the estimated production cost using these feedstocks is $1.15 to $1.43 per gallon. Because a gallon of ethanol contains less energy than a gallon of gasoline, the production cost of ethanol must be multiplied by a factor of 1.5 to make an energy-cost comparison with gasoline. This means that if ethanol costs $1.10 per gallon to produce, then the effective cost per gallon to equal the energy contained in a gallon of gasoline is $1.65. In contrast, the current wholesale price of gasoline is about 90 cents per gallon. The federal motor fuel excise tax on gasohol, a blended fuel of 10-percent ethanol and 90-percent gasoline, is 5.4 cents less per gallon than the tax on straight gasoline. In other words, the federal subsidy is 54 cents per gallon of ethanol when the ethanol is blended with gasoline. The subsidy makes ethanol-blended fuel competitive in the marketplace and stimulates the growth of an ethanol production and distribution infrastructure. In other words, you and I pay 54 cents/gallon to the ethanol industry. With that windfall (and you thought GM is getting a hand out?) ethanol made money until oil prices collapsed. Now they are seriously in trouble, and once again the old adage is true: "if the government decides on the winner, you can bet it is a mistake".[/quote]</P> <P mce_keep="true"> </P> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT face="Times New Roman" size=3>I can understand the adage, "if the government decides on the winner, you can bet it is a mistake".</FONT></P><FONT size=3><FONT face="Times New Roman"> <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p></FONT></FONT> <P><SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA">Obviously from a free market perspective, ethanol is a mistake.<SPAN style="mso-spacerun: yes"> </SPAN>However, since government has made ethanol possible by creating an artificial market, I don’t see why they can’t just modify that artificial market to keep ethanol happening despite a worsening of normal market conditions.<SPAN style="mso-spacerun: yes"> </SPAN>In fact if the normal market conditions get too bad, we can just replace them all with an artificial market.</SPAN></P>
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