Corn economy dooms ethanol

Implications: Producing ethanol from corn is an unsustainable and economically unviable long term proposition.  Future shifts to switchgrass or other cellulosic ethanol crop sources makes more sense but does not help today.  Diesel remains a logical choice for immediate impact in fuel economy and CO2 emissions.

Analysis:

In the rush to push Ethanol fuel to market many producers seem to have forgotten the fundamental economics of supply and demand.  With corn prices surging Ethanol producers have fallen victim to the same margin squeeze brought on many industries by rising crude oil prices.  It is a poorly guarded secret anymore that is costs more petroleum energy to produce a gallon of Ethanol than is saved by driving an E85 vehicle that pumps that gallon into its tank.  As farmers divert acreage to corn strains to satisfy ethanol demand prices for food grain has ballooned, compounding the ethanol feedstock cost issue.

Wall Street has responded by beating down Ethanol stocks and rewarding Agricultural plays in seeds and fertilizer.   Many ethanol conversion plants have scaled back or stopped expansion plans, leaving the short term future of corn based E85 in doubt.

If and when crops such as switchgrass for cellulosic ethanol production gain a major foothold E85 may prove to be a sustainable choice for alternative fuels.  Until then conventional choices like diesel make far more sense.