Sunday, November 02, 2008

Demon Ethanol Is In a Coma

The most prominent ethanol energy company in the US, Verasun (VSE), is filing for Chapter 11. Among other things the firm has been pinched by falling oil prices, which make ethanol less attractive, and rising corn prices, which makes production more expensive.

When oil was at $147 a barrel, ethanol was a savior for car and truck drivers everywhere. The ethanol industry built tremendous production and transportation infrastructure. It was a "if we build it, the will come" strategy. Then, the world fell apart. Prices for gas at the pump are back down well below $3 instead of being headed toward $5 as they were in August.

Verasun says it will keep operating, but common shareholders have been crushed to death. The stock was at nearly $18 late last year. Now it is under $0.50 (see chart above, click to enlarge).

Until oil moves back above $100, ethanol companies are in a coma.

12 Comments:

At 11/02/2008 10:56 AM, Blogger Dave Narby said...

Good. Ethanol is a horrible motor fuel.

Low energy, corrosive (you can't use gasoline infrastructure to transport ethanol!), hygroscopic... I can't think of one good thing about it.

Just another example of why Congress shouldn't be making these kinds of decisions.

Just as they don't have the acumen to understand the credit 'crisis' and implement an effective bailout, they apparently didn't have either the time or perhaps the brainpower to understand that ethanol is a dead-end for a transport fuel.

Thankfully the market made this decision for them sooner than later.

 
At 11/02/2008 11:38 AM, Anonymous jrich said...

It may be in a coma, but it won't die, unfortunately...green-niks in Congress will put it on a subsidy life support, I'd bet.

 
At 11/02/2008 5:30 PM, Anonymous Anonymous said...

..is there some fundamental economic problem in centrally planning a national energy program ?

Surely, Congress can consult the energy-experts for the right decisions... even if individual congressmen lack the proper technical expertise.

Obviously, America's Ethanol program just needs a little tweaking -- perhaps Paulson/Bernake could now focus their talents in that area... after their triumphs in socialized national finance.

:-) :-)

 
At 11/02/2008 5:32 PM, Blogger David said...

We need an other bailout!

 
At 11/02/2008 8:44 PM, Blogger Jack McHugh said...

"If we subsidize it, they will come."

So they did, and all went broke.

"If we mandate it, they will sell it."

Hmmm - what if the "they" are all broke? Ordinarily I would assume that there's an escape clause in the statute in case there just ain't any ethanol available to be mixed with the gas, but this whole boondoggle is so crazy they might have left it out.

 
At 11/02/2008 10:18 PM, Anonymous Anonymous said...

US Institutions Receiving Fed Bailout
(as of 10/27/08)
Institution Bailout
Bank of America
(merger with Merrill Lynch) $25 billion
Bank of New York Mellon $3 billion
Capital One $3.55 billion
Citigroup $25 billion
City National Corporation $395 million
Comerica Incorporated $2.25 billion
Fifth Third Bancorp $3.4 billion
First Horizon National Corp. $866 million
First Niagara Financial Group, Inc. $186 million
Goldman Sachs $10 billion
Huntington Bancshares $1.4 billion
JP Morgan $25 billion
KeyCorp $2.5 billion
Morgan Stanley $10 billion
Northern Trust Corporation $1.5 billion
PNC Financial
(merger with National City) $7.7 billion
Regions Financial Corporation $3.5 billion
State Street Corporation $2 billion
SunTrust Banks $3.5 billion
UCBH Holdings, Inc. $298 million
Valley National Bancorp $330 million
Washington Federal $230 million
Wells Fargo $25 billion

Poor bastards must be in the wrong business.

 
At 11/02/2008 11:08 PM, Blogger Yorzhik said...

Ethanol already has big subsidies. If they cannot make it with them until oil is above $100/barrel, then it really cannot work (with corn at least).

 
At 11/03/2008 6:52 AM, Anonymous Anonymous said...

As many as 1,800 publicly held institutions could apply for U.S. government investments in coming weeks, the Wall Street Journal said, citing Treasury and banking regulators.
http://www.reuters.com/article/ousiv/idUSTRE4A210A20081103

Maybe they could jump on the public tit that enslaves the taxpayers and workers to prop up insolvent private corporations.

 
At 11/03/2008 6:24 PM, Anonymous qt said...

When even Paul Krugman thinks ethanol is a non-starter, you know it's doomed

 
At 11/05/2008 12:31 AM, Anonymous jimcoma said...

Coma is a extended period of unconscious stage, more specifically speaking coma is profound unconscious stage. The affected patient dont show any response to stimuli such as light, pain etc.

 
At 11/06/2008 1:14 PM, Blogger OBloodyHell said...

> ..is there some fundamental economic problem in centrally planning a national energy program?
Surely, Congress can consult the energy-experts for the right decisions... even if individual congressmen lack the proper technical expertise.


Theoretically, this might be somewhat possible.

Two problems arise:
1) The experts can be wrong, and often are. The market is far more flexible and ready to change course when an error has been made and is discovered. Bureaucrats have a vested interest in keeping to the same course, hence resist corrective action with extreme force.

2) They aren't going to the experts, they're getting advice from the Greens. Since the Greens are uniformly either (a) ignorant fools, or (b) lying charlatans (self-serving and otherwise), this is not a place to get even vaguely valid advice.

The obvious example I can identify is that there will be a massive emphasis on developing solar power. It is easy to demonstrate that even with a PERFECT solar cell, you'd still need to cover an area around that of the STATE OF DELAWARE to meet US power needs. Whatever percentage you want to replace is a percentage of that. The cost of such a replacement at half current prices would be on the order of 4.5 TRILLION dollars, and that ignores both the massive amounts of toxic waste produced in the creation of them and also in the issues of disposal -- since cells are only good for 5-10 years, you are also talking about a far shorter amortization period than you have with conventional plants, in addition to those disposal issues... EVERY 5-10 YEARS.

But Obama advocates replacing coal with solar, etc. Does that sound like good policy to you?

 
At 11/06/2008 1:16 PM, Blogger OBloodyHell said...

Jim, you're kinda getting off the point attempting to apply medical-grade interpretation to a casual usage.

"Coma" is good enough for... government work.

:oP

 

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